CHF: Betting on no SNB intervention - ING

The Swiss franc had its biggest one-day rally since 2015 yesterday, emerging as the preferred recipient of safe-haven flows leaving the dollar. USD/CNH is tentatively rebounding above 0.820 this morning following an acceleration of the drop overnight that saw the 0.814 level being briefly touched, ING's FX analyst Francesco Pesole notes.

USD/CHF risks sliding toward 0.800

"It appears that the market's preference for the Swiss franc is mirroring the contained risk that the Swiss National Bank (SNB) will intervene to prevent excessive CHF strength. The reasoning here is that sustained, one-sided FX intervention would raise alarm bells at the US Treasury, which could then officially label Switzerland an FX manipulator and impose harsher tariffs."

"On Monday, the SNB publishes sight deposit figures for March. A rise in sight deposits is generally a signal that the Bank is intervening to weaken the franc. That may not be too indicative of what the SNB is doing or is planning to do in April, as March's CHF gains vs the USD were considerably more contained, and EUR/CHF actually rallied on the back of German fiscal stimulus."

"But a market that is clearly minded to over-reward defensive alternatives to the dollar may read stable sight deposits as another reason to stay bullish on CHF. Unless the SNB does intervene to stop the rally or trade-related news turns the tide on the dollar, the risks remain on the downside for USD/CHF, which can test 0.800 before sustainably recovering."