Headlines Week May 08, 2017 The centre-left politician Macron has won the French elections. He is a politician that – similar to Hollande four years ago – promises economic improvements, move investment, more jobs. Mostly probably he will fail similar to his predecessor because the French economic reality is simply different. His success moved the EUR/CHF up to 1.0865, mostly caused by FX speculators. But serious investors – i.e. not FX speculators – did not follow the political event. The SNB had to intervene for 2.4 bn francs. Serious investors are far more interested into monetary policy and not in politics. And there things remained clear: Draghi continues to be dovish, no ECB rate hike in sight. And so the EUR/CHF must go down again. Euro/Swiss Franc FX Cross Rate, May 08(see more posts on EUR/CHF, ) Source: Markets.ft.com - Click to enlarge SNB sight deposits Swiss private investors do not export their massive trade surplus with purchases assets in foreign currency, apparently because valuations of stock markets are too high and bond rates are too low still. As consequence the SNB intervenes and takes the risk that private investors do not want. With this measure she either risks its bankruptcy or – over the long-term – she deviates from its mandate to avoid inflation.
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George Dorgan considers the following as important: currency reserves. intervention, Featured, monetary data, newsletter, SNB, SNB sight deposits
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Headlines Week May 08, 2017
The centre-left politician Macron has won the French elections. He is a politician that – similar to Hollande four years ago – promises economic improvements, move investment, more jobs. His success moved the EUR/CHF up to 1.0865, mostly caused by FX speculators. But serious investors – i.e. not FX speculators – did not follow the political event. The SNB had to intervene for 2.4 bn francs. Serious investors are far more interested into monetary policy and not in politics. And there things remained clear: Draghi continues to be dovish, no ECB rate hike in sight. And so the EUR/CHF must go down again. |
Euro/Swiss Franc FX Cross Rate, May 08(see more posts on EUR/CHF, ) |
SNB sight depositsSwiss private investors do not export their massive trade surplus with purchases assets in foreign currency, apparently because valuations of stock markets are too high and bond rates are too low still. As consequence the SNB intervenes and takes the risk that private investors do not want. With this measure she either risks its bankruptcy or – over the long-term – she deviates from its mandate to avoid inflation. The last time she realized that was in January 2015, when the peg broke. We should remind that the EUR/CHF is clearly higher than the 0.90 that we expect in a couple of years – in the case of a combination of inflation and recession. Intervening at elevated exchange rates – buying euros at 1.08 or dollars at 1.00 – is risky. It obliges the SNB to accumulate owners’ capital – for example with dividends and coupons. Thinking that stock markets will always go up, is an illusion. Last week’s data: |
Change in SNB Sight Deposits April 2017(see more posts on SNB sight deposits, )Two Innings of Swiss Franc Appreciation |
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 data as of May 02: The net short CHF position has risen to 17K contracts (against USD). |
Speculative Positions
source Oanda |
Date of sight deposits (+ 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) |
---|---|---|---|---|---|---|---|---|
05 May | 1.0843 | 1.0939 | -17708X125K | +1.6 bn. per week | 573.1 bn. | 480.5 bn. | 92.6 bn. | |
28 April | 1.0832 | 1.0895 | -17317X125K | + 2.4 bn. per week | 571.5 bn. | 479.5 bn. | 92.0 bn. | |
21 April | 1.0710 | 1.0734 | -13802X125K | +3 bn. per week | 569.1 bn. | 480.6 bn. | 88.5 bn. | |
14 April | 1.0683 | 1.0618 | -10128X125K | +2 bn. per week | 567.1 bn. | 480.6 bn. | 86.5 bn. | |
07 April | 1.0696 | 1.0648 | US GDP release | -13825X125K | +2.4 bn. per week | 564.1 bn. | 476.2 bn. | 87.9 bn. |
For the full background of sight deposits and speculative positions see
SNB Sight Deposits and CHF Speculative Positions
Tags: currency reserves. intervention,Featured,monetary data,newsletter,SNB sight deposits