With the Swiss franc trading at multi-year highs since June, many expected the Swiss National Bank to intervene, in a return to its typical playbook.
Having relied heavily on currency intervention to control CHF pricing in years past, it would seem that new leadership, under Chair Martin Schlegel, is less interested in ‘interventionist policy’ than his predecessors.
While the market has slowly but surely come to this realisation, having seen many opportunities this year where intervention would have likely happened in years past, it seems the SNB is taking a more hands-off approach.
This has been further vindicated by the SNB’s clear difference in buying habits, which have purchased fewer francs in the last twelve months than in previous years by an order of magnitude.
While traders have been cautious about taking further CHF shorts, fearing a potential for intervention, it would seem that, once all pieced together, the SNB is more comfortable with a stronger franc than once thought.
On this basis, considering the SNB is more likely to leave the CHF at the mercy of market forces in the short term, we can consider USD/CHF downside renewed, as seen in yesterday’s session.
That said, traders would do well to remember that an apparent change to ‘non-interventionalist’ policy only remains true until it doesn’t; so best to approach with at least some caution.
