FXStreet (Barcelona) – The SNB is likely to disappoint the markets in its 18th June meeting by holding policy intact, and hence near-term EUR/CHF dips remain a good buy opportunity, according to FX Strategists at Nomura.
Key Quotes
“Even though we do not expect the SNB to proactively ease its monetary policy anytime soon, Swiss yields could still stay at low levels even though foreign yields have risen recently. The Swiss economy is unlikely to benefit from the recent recovery in euro area inflation anytime soon, as the scrapping of the FX floor is likely to widen the inflation difference between the euro area and Switzerland again. As a result, the yield spread could widen gradually as foreign yields rise, slowing repatriation by Swiss investors.”
“Recent high volatility in the bond market may discourage the CHF carry trade for the time being, but higher global yields will improve the attractiveness of the CHF carry trade in the medium term. EUR/CHF movement will heavily depend on foreign yields, especially euro area yields, while the Greek situation will be also important in the near future.”
“We are currently flat trading CHF, but we are looking for a good entry point for CHF short positions against EUR and/or USD. While the SNB is unlikely to ease proactively anytime soon, the Bank is still likely to keep small intervention operation to prevent further appreciation of CHF, as CHF remains clearly overvalued. Thus, CHF upside risk should be relatively limited. In the near future, consolidation of Bunds may slow the momentum of EUR/CHF appreciation.”
“In addition, the next SNB meeting on 18 June is likely to disappoint the market as the Bank is unlikely to ease its policy, which may lead to a good opportunity for buying EUR/CHF on dips.”
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