by SignalFactory · September 11, 2019 | 04:16:56 UTC
The main drivers
impacting on the Swiss Franc in the short-term are the European Central Bank
(ECB) policy meeting on Thursday and general global risk trends.
The ECB meeting could
impact on the Franc if it leads to a sharp fall in the Euro as the Swiss
authorities will want to prevent too much of depreciation against the Franc so
as to protect Swiss exporters.
This tends to be why
the Swiss National Bank (SNB) policy usually follows ECB policy.
The consensus
expectation amongst economists is that the ECB will ease policy on Thursday but
there is much debate about the extent to which it will ease.
If it is aggressive
and announces a revival of quantitative easing – the printing of money to
hoover up assets such as corporate and government bonds – the Euro is likely to
weaken. In such a scenario the SNB will probably follow suit with further
easing or direct intervention in order to try and keep the CHF and EUR closely
aligned. The Swiss economy tends to struggle when its currency becomes elevated
relative to the likes of the Dollar and Euro, as Swiss exports are priced out
of the global market.
This is likely to
weaken the Swiss Franc across the board, including against the Pound, leading
to gains for GBP/CHF. (FOR THE LONG THERM)
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