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Mar 18 - 10:55 AM

Credit Agricole: Potential Opportunities to Sell CHF Post-SNB Meeting on Thursday

By eFXdata  —  Mar 18 - 09:30 AM

Synopsis:

Credit Agricole anticipates a scenario where investors might find favorable conditions to resume selling the Swiss Franc (CHF) following the upcoming Swiss National Bank (SNB) meeting on Thursday. The bank is expected to maintain its current policy stance, providing a potential knee-jerk rally in the CHF as an opportunity for selling. The decision to hold is based on several factors including cooling CPI within target levels, relatively moderate Swiss interest rates compared to other G10 central banks, and recent CHF depreciation which indirectly eases monetary conditions.

Key Points:

  • SNB's Expected Hold: Predictions suggest the SNB will not adjust its policy, attributing to controlled inflation and the absence of restrictive interest rates.
  • CHF Depreciation: The recent weakening of the CHF has played a role in easing monetary conditions, a development the SNB might want to sustain or amplify by hinting at potential FX interventions to counteract excessive CHF strength.
  • Lack of Forward Guidance: The meeting is unlikely to offer explicit forward guidance, instead potentially highlighting inflation forecasts and the central bank's readiness to act against undue CHF strength.

Conclusion:

The SNB meeting could present an opportune moment for CHF sellers, especially if the bank's decision to maintain its current policy prompts a temporary CHF rally. Credit Agricole suggests that the SNB's stance, coupled with its strategic silence on forward guidance and emphasis on monitoring CHF levels, could reinforce conditions favorable for selling the CHF in the aftermath of the meeting. This approach aligns with broader expectations of the SNB's efforts to manage the currency's strength without resorting to immediate policy tightening.

Source:
Crédit Agricole Research/Market Commentary

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