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Weekly Sight Deposits and Speculative Positions: SNB Intervenes for 2.4 bn CHF, while Speculators increase CHF Shorts

Headlines Week February 06, 2017

Recently inflation rose more quickly in the euro zone, but this was mostly caused by a temporary oil price effect. Therefore the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.

Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both. Wages are increasing more strongly only in Germany and Eastern European countries.

FX week February 06

In the week after the disappoint US GDP release, the EUR/CHF fell to 1.0650.

A big Swiss bank bets on EUR/CHF 1.10 as soon as the ECB ends their bond buying program.

But one should realize that private investors will need to buy the EUR at 1.10, the SNB is not willing to do so any more. Hence we must see SNB interventions of zero before.

 

 

 

 

 

Euro/Swiss Franc FX Cross Rate, February 06

(see more posts on EUR/CHF, )
Euro/Swiss Franc FX Cross Rate, February 06

Source: markets.ft.com - Click to enlarge

SNB sight deposits

An increase in SNB sight deposits means that the central bank has intervened.

Last week’s data:

The SNB intervenes for 2.4 bn CHF in one week. This is the highest value since Trump’s election.

Change in SNB Sight Deposits January 2017

(see more posts on SNB sight deposits, )
Change in SNB Sight Deposits January 2017

Source: SNB - Click to enlarge

Speculative Positions

Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.

The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The carry trade against CHF collapsed.

The reverse carry trade in form of the Long CHF started and lasted - without some interruptions - until the peg introduction in September 2011.

In mid 2011, the long CHF trade became a proper carry trade - and not a reverse carry trade anymore - because investors thought that the SNB would hike rates earlier than the Fed.

 

Last week’s data:
Speculators trade with the SNB, they are short CHF with 17K positions. They should realize that the SNB regularly lowers her EUR/CHF target.

Speculative Positions


Choose Swiss Franc for CHF Commitment of Traders

source Oanda

 

 

Date of data (+ link to source) avg. EUR/CHF during period avg. EUR/USD during period Events Net Speculative CFTC Position CHF against USD Delta sight deposits if >0 then SNB intervention Total Sight Deposits Sight Deposits @SNB from Swiss banks “Other Sight Deposits” @SNB (other than Swiss banks)
03 February 1.0681 1.0761 US creates 227K new jobs. -17140X125K +2.4 bn. per week
535.2 bn.
462.3 bn.
72.2 bn.
27 January 1.0718 1.0725 US Q4 GDP only +1.9% -13644X125K +0.5 bn. per week
532.8 bn.
466.7 bn.
66.1 bn.
20 January 1.0726 1.0663 USD correction continues. -13683X125K +0.9 bn. per week 532.3 bn. 464.3 bn. 68.0 bn.
13 January 1.0733 1.0593 Fed meeting, USD correcting -14246X125K +1.7 bn. per week
531.4 bn.
464.2 bn.
67.2 bn.
06 January 1.0708 1.0499 Good U.S. jobs report. -13439X125K +0.7 bn. per week
529.7 bn.
467.6 bn.
62.1 bn.

For the full background of sight deposits and speculative positions see

SNB Sight Deposits and CHF Speculative Positions

Are you the author?
George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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