The figures published yesterday morning on the Swiss National Bank's (SNB) foreign exchange market operations in the second quarter confirmed what the statements made at the last press conference had already indicated, Commerzbank’s FX analyst Michael Pfister notes.

SNB reluctant to take action against the strong franc

“For the time being, the SNB appears to be continuing to rely mainly on the key interest rate as its preferred instrument, with interventions even lower than the already quite low level in the first quarter. And this is despite the fact that, in the first quarter, one might have assumed that the SNB was slow to switch to foreign currency purchases, i.e. that it was first buying CHF and then selling CHF later in the quarter, thereby distorting the quarterly aggregate. In short, the SNB seems reluctant to take stronger action against the strong franc, at least for the time being.”

“Although the data are published with a long lag and the picture may look different in the third quarter, the SNB's current focus on the policy rate as a means of combating the strong franc – and the fact that most market participants are aware that the scope for rate cuts is much more limited here than in other G10 currencies – suggests that the scope for franc weakness is also more limited than recently thought.