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Weekly Sight Deposits and Speculative Positions: Once again a new SNB intervention record

Summary:
Headlines Week February 20, 2017 Recently inflation rose more quickly in the euro zone, but this was mostly caused by a temporary oil price effect. Therefore the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents. Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both. Wages are increasing more strongly only in Germany and Eastern European countries. FX week until February 20 The EUR/CHF fell to new lows. The average rate in the week was 1.0648. The SNB is apparently ready to let the pair slowly descend. A big Swiss bank bets on EUR/CHF 1.10 as soon as the ECB ends their bond buying program. But to our view EUR/CHF will touch parity first, because it will take at least 2-3 years until the ECB normalizes rates. Euro/Swiss Franc FX Cross Rate, February 20(see more posts on EUR/CHF, ) Source: markets.ft.com - Click to enlarge SNB sight deposits An increase in SNB sight deposits means that the central bank has intervened. Last week’s data: Once again a massive SNB intervention and a post Trump election record: 4.5 billion CHF at a EUR rate of 1.0648.

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Headlines Week February 20, 2017

Recently inflation rose more quickly in the euro zone, but this was mostly caused by a temporary oil price effect. Therefore the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.

Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both. Wages are increasing more strongly only in Germany and Eastern European countries.

FX week until February 20

The EUR/CHF fell to new lows. The average rate in the week was 1.0648. The SNB is apparently ready to let the pair slowly descend.

A big Swiss bank bets on EUR/CHF 1.10 as soon as the ECB ends their bond buying program. But to our view EUR/CHF will touch parity first, because it will take at least 2-3 years until the ECB normalizes rates.

Euro/Swiss Franc FX Cross Rate, February 20

(see more posts on EUR/CHF, )
Weekly Sight Deposits and Speculative Positions: Once again a new SNB intervention record

Source: markets.ft.com - Click to enlarge

SNB sight deposits

An increase in SNB sight deposits means that the central bank has intervened.

Last week’s data:

Once again a massive SNB intervention and a post Trump election record: 4.5 billion CHF at a EUR rate of 1.0648. We should remind that this is clearly higher than the 0.90 that we expect in a couple of years.

Change in SNB Sight Deposits January 2017

(see more posts on sight deposits, )
Weekly Sight Deposits and Speculative Positions: Once again a new SNB intervention record

Source: SNB - Click to enlarge

Two Innings of Swiss Franc Appreciation

Weekly Sight Deposits and Speculative Positions: Once again a new SNB intervention record

- Click to enlarge

Speculative Positions

Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.

The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The carry trade against CHF collapsed.

The reverse carry trade in form of the Long CHF started and lasted - without some interruptions - until the peg introduction in September 2011.

In mid 2011, the long CHF trade became a proper carry trade - and not a reverse carry trade anymore - because investors thought that the SNB would hike rates earlier than the Fed.

Last week’s data:

Speculators increased their EUR net short position against the dollar, but lowered their CHF net shorts (vs. USD). This tendency confirms our view that EUR/CHF will move towards parity (if the SNB does not object…).

Speculative Positions


Choose Swiss Franc for CHF Commitment of Traders

source Oanda

Date of data (+ link to source) avg. EUR/CHF during period avg. EUR/USD during period Events Net Speculative CFTC Position CHF against USD Delta sight deposits if >0 then SNB intervention Total Sight Deposits Sight Deposits @SNB from Swiss banks “Other Sight Deposits” @SNB (other than Swiss banks)
17 February 1.0648 1.0613 Improving Swiss consumer climate -11484X125K +4.5 bn. per week 543.5 bn. 468.0 bn. 75.5 bn.
10 February 1.0659 1.0685 Good US jobs report. -14621X125K +3.8 bn. per week
539.0 bn.
464.5 bn.
74.5 bn.
03 February 1.0681 1.0761 US creates 227K new jobs. -17140X125K +2.4 bn. per week
535.2 bn.
462.3 bn.
72.2 bn.
27 January 1.0718 1.0725 US Q4 GDP only +1.9% -13644X125K +0.5 bn. per week
532.8 bn.
466.7 bn.
66.1 bn.
20 January 1.0726 1.0663 USD correction continues. -13683X125K +0.9 bn. per week 532.3 bn. 464.3 bn. 68.0 bn.
13 January 1.0733 1.0593 Fed meeting, USD correcting -14246X125K +1.7 bn. per week
531.4 bn.
464.2 bn.
67.2 bn.
06 January 1.0708 1.0499 Good U.S. jobs report. -13439X125K +0.7 bn. per week
529.7 bn.
467.6 bn.
62.1 bn.

For the full background of sight deposits and speculative positions see

SNB Sight Deposits and CHF Speculative Positions


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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

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