The swissie is leading the charge today but that doesn't tell the whole story
The Swiss franc is by far the best performing major currency so far in 2H 2018
The currency is up 2.7% against the dollar since the start of July backed by haven demand as geopolitical tensions arising from trade rhetoric as well as Italian political troubles are helping to contribute to flows in the swissie.
Although the SNB has said that they won't let the ballooning balance sheet stop them from intervening in the market, so far there hasn't been any strong indications of them doing so. EUR/CHF is trading near one-year lows and the latest sight deposits data released today here doesn't suggest that they are really in the market at all.
The SNB is walking along a really tight rope when it comes to interventions as they risk further scrutiny on their balance sheet, which is over 100% of Swiss GDP, management. If they are finding it tough to enter the market because of that, this week's monetary policy meeting presents the perfect platform for them to make their stand.
The best they can do is to introduce verbal intervention and the obvious one is shifting back the language on the swissie. Their latest statement mentions that the franc is "highly valued" and a shift back to the "significantly overvalued" or anything more substantial will at least help to threaten markets with possible intervention if the franc remains at current levels.
With the central bank wanting to guide the currency back to 1.20 against the euro, doing nothing this week risks will only continue to fuel buyers in the franc even more - particularly when geopolitical tensions globally remain relatively high - as the SNB hasn't played a strong hand at the table for the last two to three months. And without any verbal intervention this week, it only adds to that notion.
SNB meetings in general tend to be rather mundane but this could be one that sets up the market trend for the remainder of the year.
