SNB expected to remain on hold at Q4 meeting - Nomura

The Q4 Swiss National Bank (SNB) meeting on 15 December is likely to be uneventful, with the SNB probably on hold and the same forward guidance of an overvalued CHF likely to remain in place expects Research Team at Nomura.

Key Quotes

“This does not mean there is not a trade in it though. We note that over the past eight SNB meetings, the market has paid a near cumulative 72bp over SNB meetings in the last two years on concerns that more cuts have yet to come. We have consistently held the view that the SNB will remain on hold unless the FX market pushes it to act. But there is also a lesser told story of the SNB’s FX reserve accumulation and it has been heading steadily higher.”

“In November alone intervention was CHF21.5bn and FX reserves are now 31% larger (at CHF648bn) than before the floor was removed. So as long as the SNB maintains a “leaning against the wind” policy, it means CHF strength should be limited, especially when the “Trumpflation trade” should see low yielders such as JPY, EUR and CHF underperform into 2017.”