During the French Presidential elections, it was clear that the Swiss National Bank was selling franc to prevent any safe haven effect. Uncertainties regarding the outcome (at least before the first round) drove the Swiss institution to intervene massively.
The Swiss currency is now back on the US Treasury watch of currency manipulators and the Finance Ministry declared that the Central Bank is only trying to limit the overvaluation from the franc and not gain a competitive advantage, which is - in the end - the same thing. It is becoming tougher for the SNB to convince markets about the exact nature of its intervention.
The Swiss foreign exchanges are now larger than the Swiss GBP and today’s total sight deposits have largely increased by 2 billion CHF. We continue to be bullish on the CHF as upside pressures on the currency should continue. Datawise, the trade balance is still largely positive and is even increasing.
Next week, export data for April will be released and they are expected to print at a great + 2.5% m/m (out of inflation) while imports should continue to decline. It is clear that the Swiss economy resists well, which leaves some room for the SNB to intervene.
By Yann Quelenn