EUR/CHF hit fresh lows for the year yesterday but the SNB is still keeping price action above the 1.0500 handle
EUR/CHF nudged to a low of 1.0505 in overnight trading, amid initial pressures on equities in US trading before reversing the move to keep around 1.0515-30 levels – which has turned into a bit of ‘sweet spot’ in the pair over the past week or so.
It is very much clear that the SNB is actively intervening – rather strongly for that matter, as seen with the weekly sight deposits data
– to defend the franc from appreciating further but the key question will be how long can they keep this up?
I don’t think anyone can quite answer that but much like the incident back in January 2015, the longer this pent up “floor” in EUR/CHF goes on, the sharper the fall may be once the SNB decides to pull the rug from the market’s feet.
That said, don’t expect the drop to be anything quite as drastic. I would expect things to move more gradually as the SNB will still be actively looking to smooth out the appreciation rather than cause unnecessary volatility.