Bank of America Securities analysts highlighted the Swiss National Bank (SNB) recent intervention in the foreign exchange markets, which aims to weaken the Swiss franc (CHF) amid significant market turmoil.
Bank of America expects a further depreciation of the Swiss franc, as the real effective exchange rate has largely recovered from the year-to-date depreciation, keeping pressure on the Swiss National Bank to ease monetary conditions.
The SNB’s action last week marks the bank’s second-largest intervention of the year. ‘Foreign exchange interference continues in
in support of the Swiss National Bank’s dual monetary policy strategy, which is a combination of interest rate changes and foreign exchange sales to achieve the inflation target.”
During the first half of 2024, strong demand for transfer deals seemed unstoppable, as the G10 FX ranking table reflects this trend. However, by the end of July, the EUR/CHF pair reversed all the gains it had made since the beginning of the year.
The SNB’s response to these sharp and volatile currency moves has been significant, as evidenced by the recent rise in visual deposits, which represents the second-largest increase since April April amid rising tensions in the Middle East and the fourth-largest increase since 2023.
The Swiss franc’s recent rise, which saw most of its losses incurred recover earlier in 2024, led to the SNB’s decision to cut interest rates on June 20. Bank analysts suggest that the performance of the Swiss riyal exchange rate will likely influence the Swiss central bank’s monetary policy decisions at the September meeting.
The beginning of this week saw some reversal in the Swiss franc’s recent gains, and Bank of America’s analysis suggests a further weakening trend for the Swiss franc against currencies such as the Australian dollar and the pound sterling.
These currency pairs are seen as clear indicators of the likelihood of an average reversal in trading volume. In addition, Bank of America points to potential gains in EUR/CHF and USD/CHF pairs as more defensive positions for the weakness of the CHF.
‘Our final word is to remind readers that relative fundamental expectations
Between Switzerland and peers have not changed. Positioning has been the main driver that we think makes CHF sales attractive again.”
This article was translated with the help of an artificial intelligence program after an editor’s review. For more details please refer to Banha Terms and Conditions
Read also:Sterling gives up two-week peak on UK inflation data
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