Chart of the Week: SNB Forex Intervention

In this edition, we focus on upcoming central bank meetings once again. On Thursday morning at 11:30 AM (GMT), the SNB will communicate its monetary policy decision. Like most analysts, we expect that interest rates will remain unchanged. The fact that the ECB has only lowered its deposit rate by 10 basis points last week substantially reduces the pressure on the SNB to lower its rates.

On the top of that, the SNB now seems to be comfortable with the current CHF exchange rate. According to the latest data, the evolution of sight deposits at the SNB is stable at CHF 591 billion, which tends to suggest that the central bank has reduced its FX interventions or even temporarily stopped them since the last week of August.

Given number of risks that may emerge in coming weeks and could potentially push the CHF higher (Brexit, growth slowdown and US tariffs against Europe following the US victory in Airbus case), the SNB has every interest in keeping ammunition. Lowering interest rates as early as this week would considerably reduce the central bank’s room for maneuver later.