25 Mar 2015
SNB’s QE on the cards? – Danske Bank
FXStreet (Edinburgh) - In light of the recent sharp pullback in EUR/CHF below the 1.05 mark, Christin Tuxen, Senior Analyst at Danske Bank, highlighted the possibility of the SNB to start a QE programme.
Key Quotes
“EUR/CHF saw a sustained move lower yesterday below 1.05, the level where we deem that the SNB becomes alert to further CHF strength”.
“First line of defence has so far been intervention but it is noteworthy that the IMF earlier this week mentioned the possibility of easing Swiss monetary policy by means of a foreign-currency QE scheme – and that SNB's Moser noted that this is indeed one of the options the SNB considers”.
“Announcing a target for asset purchases would be a way for the SNB to pre-commit to a certain amount of monetary easing (in contrast to expanding the money base on an ad-hoc basis when EUR/CHF dips)”.
“SNB's problem is that there is limited scope for buying domestic assets, so it will likely have to look abroad for something to buy. This of course may require some coordination across borders but with the IMF giving a ‘green light’ to this, we are somewhat closer to a form of QE in Switzerland”.
“We still look for EUR/CHF to go stronger in 6-12M on ECB weakness fading and easier SNB policy (intervention, rate cut, and/or asset purchases)”.
Key Quotes
“EUR/CHF saw a sustained move lower yesterday below 1.05, the level where we deem that the SNB becomes alert to further CHF strength”.
“First line of defence has so far been intervention but it is noteworthy that the IMF earlier this week mentioned the possibility of easing Swiss monetary policy by means of a foreign-currency QE scheme – and that SNB's Moser noted that this is indeed one of the options the SNB considers”.
“Announcing a target for asset purchases would be a way for the SNB to pre-commit to a certain amount of monetary easing (in contrast to expanding the money base on an ad-hoc basis when EUR/CHF dips)”.
“SNB's problem is that there is limited scope for buying domestic assets, so it will likely have to look abroad for something to buy. This of course may require some coordination across borders but with the IMF giving a ‘green light’ to this, we are somewhat closer to a form of QE in Switzerland”.
“We still look for EUR/CHF to go stronger in 6-12M on ECB weakness fading and easier SNB policy (intervention, rate cut, and/or asset purchases)”.