The Swiss franc started the year in the best possible way against the single currency, at least in the view of the Swiss National Bank, as EUR/CHF climbed to its highest level since January 2015 and hit 1.1832.
Unfortunately, for Thomas Jordan and his team, this period of respite was short-lived as the currency pair headed back down over the last week and fell as low as 1.1572 during the Asian opening.
The second half of 2017 were like holidays for the SNB, with EUR/CHF climbing as much as 10% to reach 1.1832 on January 15th, and allowed the monetary institution to dramatically reduce – if not completely phase out – FX intervention. Indeed, total sight deposits at the SNB stabilised at around CHF 575 billion, down from the record level of CHF 579.7 billion reached in August last year.
Last night, EUR/CHF’s price action was volatile before the currency pair started to pick up towards 1.1630. There is rumour that the SNB has had to step forward to stop further CHF appreciation. As usual, it is hard to tell whether the rumours are true or not. However, given the sharp appreciation of the Swiss Franc of the past couple of weeks, there is little doubt the central bank won’t stand and watch the CHF going to the moon. Market participants will get more information next Monday when the SNB will release its weekly report. We believe the central bank won’t let the currency pair move below the 1.15 threshold.