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  • USD/CHF bounced at support in the 0.8850 area again, though did manage to squeeze out a fresh multi-year low by one pip.
  • Declining Swiss sight deposits suggest a less active SNB ahead of Thursday’s rate decision.

USD/CHF managed to squeeze out a fresh multi-year low at 0.8849 on Monday, but the 0.8850 support area proved too tough to crack for the second trading day running, and the pair has since recovered back to closer to the 0.8870 area. The pair closed Monday FX trade with losses of just under 0.3% or just over 20 pips.

SNB FX intervention drops ahead of this week’s rate decision

Weekly Swiss Sight Deposits data released during Monday’s European morning showed Domestic Sight Deposits dropping to CHF 636.3B from CHF 639.3B last week, implying less activity in FX markets by the Swiss National Bank in the lead up to this week’s rate decision on Thursday. For context, rising Sight Deposits implies that the SNB has been activity buying EUR or USD with CHF. Intervention in FX markets to weaken CHF is one of the SNB’s key policy tools for supporting the export dependant Swiss economy. Thus, Monday’s morning’s data appears to have given CHF a slight boost on the day. 

In terms of this week’s SNB monetary policy announcement; Credit Agricole comments that “with fundamentals as they stand, the risk is low risk that the SNB will suggest anything different from a policy mix consisting of negative rates and currency intervention as needed to remain in place for an extended period of time”. The bank thinks that risk sentiment will remain in the drivers seat for CHF and “should sentiment continue to improve, we believe there is scope for position squaring-related CHF downside towards year-end and beyond with net long positioning still elevated, as per our data”. Alternatively, caveats the bank, “if sentiment were to turn more unstable, we believe the SNB’s aggressive monetary policy stance coupled with positioning as it stands should keep any CHF upside risks strongly limited”.