(15 JUNE 2017)DAILY MARKET BRIEF 2:Switzerland: SNB holds rates unchanged

Loose monetary policy is to continue for some more time. The EURCHF pair is back above 1.0900. This morning Swiss policymakers have decide to hold rates unchanged at -0.75% repeating that the Swiss franc is largely overvalued and that this is a threat for the Swiss economy. The Swiss franc is trading at a level around 30 times higher than levels before the financial crisis. Such high levels are definitely boosting deflationary pressures.

The plan is definitely staying the same for the central bank. Defending the Swiss Franc at all costs. The FX reserves keep on growing towards very massive levels. It now represents CHF 700 billion. As long as the Swiss central bank considers the currency is overvalued, the FX reserves are going to keep climbing.

In Swiss political news, Didier Burkhalter, head of the Federal Department of Home Affairs, will leave the Federal Council on October 31st. He was mostly criticised for his pro-Europe views. Monitoring relations with the EU is very important, as one key driver for the CHF depends on its giant neighbour.

For the time being, we can see that political uncertainties have reduced since the French elections. Nonetheless, other political uncertainties seem to arise with Hungary, Czech Republic or Poland seeming to refuse to welcome any more migrants and they will likely be sanctioned by the European Commission.

By Yann Quelenn