by George Dorgan
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Headlines Week February 13, 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 13 The EUR/CHF continues between 1.0630 and 1.0680 A big Swiss bank bets on EUR/CHF 1.10 as soon as the ECB ends their bond buying program. But one should realize that private investors will need to buy the EUR at 1.10, but the SNB is not willing to do so any more. Hence we must see SNB interventions of zero, before EUR/CHF goes to 1.10. We rather see EUR/CHF of 1.00, more here and here. Euro/Swiss Franc FX Cross Rate, February 13(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: The SNB intervenes for 3.8 bn CHF in one week.
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George Dorgan considers the following as important: currency reserves. intervention, Featured, minimum reserves, monetary data, negative interest, newsletter, Reserves, sight deposits, SNB
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Headlines Week February 13, 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 13 The EUR/CHF continues between 1.0630 and 1.0680 A big Swiss bank bets on EUR/CHF 1.10 as soon as the ECB ends their bond buying program. But one should realize that private investors will need to buy the EUR at 1.10, but the SNB is not willing to do so any more. Hence we must see SNB interventions of zero, before EUR/CHF goes to 1.10. We rather see EUR/CHF of 1.00, more here and here. |
Euro/Swiss Franc FX Cross Rate, February 13(see more posts on EUR/CHF, ) Source: markets.ft.com - Click to enlarge |
SNB sight depositsAn increase in SNB sight deposits means that the central bank has intervened. Last week’s data: The SNB intervenes for 3.8 bn CHF in one week. This is the highest value since Trump’s election. |
Change in SNB Sight Deposits January 2017(see more posts on sight deposits, ) Source: SNB - Click to enlarge |
Speculative PositionsSpeculators 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 trade with the SNB, they are short CHF with 17K positions. They should realize that the SNB regularly lowers her EUR/CHF target. |
Speculative Positions
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) |
|---|---|---|---|---|---|---|---|---|
| 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
Tags: currency reserves. intervention,Featured,minimum reserves,monetary data,negative interest,newsletter,Reserves,sight deposits