27 Apr 2015
Stay short USD/CHF – JP Morgan
FXStreet (Edinburgh) - Analysts at JP Morgan recommended keeping short positions in the pair.
Key Quotes
“While slightly in the black, USD/CHF has not been the low drama proxy for buying EUR/USD that we had intended (a euro without the Greek tail-risk, as it were)”.
“In particular, the franc sold off intra-week on the decision by the SNB to remove the exemptions from the negative sight deposit rate enjoyed by a number of public sector depositors”.
“This was misconstrued by some as a de facto monetary easing and as such triggered a squeeze on long CHF positions, especially it seems against sterling”.
“We disagree that this is a monetary easing, nor that it was even intended by the SNB to create this impression”.
“The decision, rather, was the SNB’s response to domestic criticism that public sector depositors were receiving unfair preferential treatment from the SNB”.
“Moreover, since it is not clear why these public sector entities would switch their deposits from the SNB to private banks (they would still incur negative rates), it is hard to see why this decision should depress either market rates or the franc”.
Key Quotes
“While slightly in the black, USD/CHF has not been the low drama proxy for buying EUR/USD that we had intended (a euro without the Greek tail-risk, as it were)”.
“In particular, the franc sold off intra-week on the decision by the SNB to remove the exemptions from the negative sight deposit rate enjoyed by a number of public sector depositors”.
“This was misconstrued by some as a de facto monetary easing and as such triggered a squeeze on long CHF positions, especially it seems against sterling”.
“We disagree that this is a monetary easing, nor that it was even intended by the SNB to create this impression”.
“The decision, rather, was the SNB’s response to domestic criticism that public sector depositors were receiving unfair preferential treatment from the SNB”.
“Moreover, since it is not clear why these public sector entities would switch their deposits from the SNB to private banks (they would still incur negative rates), it is hard to see why this decision should depress either market rates or the franc”.