(03 October 2019 ) DAILY MARKET BRIEF 1:Swissie Sell-off Settles The SNB’s Business - Market News - 3 October 2019


Things seem to converge in favor of the Swiss National Bank when it comes to FX valuation. One might wonder why the safe-haven CHF
depreciated in the past few days when demand for JPY only increased due to a broad risk-off sentiment. There is certainly much to consider as
the recent releases of poor economic and inflation data combined with little exchange rate intervention should explain part of the
decline. The latest quarterly monetary policy meeting of the SNB from 19 September 2019 remained silent, with the SNB’s assessment on the
Swiss Franc valuation unchanged from current “highly valued” in contrast to “significantly overvalued” as used to be the case in the first
half of 2017, suggesting a rather limited FX intervention despite EUR/CHF trading at July 2017 ranges.

SNB’s total sight deposits have remained quite stable in the past seven weeks while 3Q foreign currency reserves published on 7 October
2019 should confirm a rather limited upward trend in currency interventions. On the opposite, the recent batch of negative headlines,
including the KOF economic forecasts for the Swiss economy, PMI, inflation and retail sales are supporting CHF bearish bias. The weakening
economic momentum from the Swiss economy pushed the KOF Institute to downgrade its GDP growth forecast for FY 2019 and 2020 to respectively
0.90% (prior: 1.60%) and 1.90% (prior: 2.3%), stating business activity and the international environment as major impediments for the
export-reliant economy. Furthermore, the collapse in headline inflation to 0.10% (prior: 0.30%), lowest since December 2016 and stable
core inflation given at 0.40% (prior: 0.40%) is not boding well as downward risk on the economy combined with a stronger CHF should not
support the gauges. On the same line, sales in the retail sector dropped -1.40% (prior: 1.50%) in August, an 11-month low, while
manufacturing PMI declined further in contraction territory, posted at 44.6 (prior: 47.2), a level not seen since July 2009. Although
slightly below the 50 mark, the Raiffeisen SME PMI indicator points 49.9 (prior: 49.8) amid improving backlogs, production volumes and
inventories. In this backdrop, it appears that the decline in the Swissie stays largely justified, although further volatility induced by
negative news on the front of both Brexit and trade should maintain CHF in demand, a scenario that the SNB is probably not in a position to
prevent.

EUR/CHF is currently trading at 1.09507, bouncing from 1.08594 (10/10/2019 low) and approaching 1.0970 short-term.

By Vincent Mivelaz



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(03 October 2019 ) DAILY MARKET BRIEF 1:Swissie Sell-off Settles The SNB’s Business - Market News - 3 October 2019
(03 October 2019 ) DAILY MARKET BRIEF 1:Swissie Sell-off Settles The SNB’s Business - Market News - 3 October 2019
(03 October 2019 ) DAILY MARKET BRIEF 1:Swissie Sell-off Settles The SNB’s Business - Market News - 3 October 2019
(03 October 2019 ) DAILY MARKET BRIEF 1:Swissie Sell-off Settles The SNB’s Business - Market News - 3 October 2019
(03 October 2019 ) DAILY MARKET BRIEF 1:Swissie Sell-off Settles The SNB’s Business - Market News - 3 October 2019

(03 October 2019 ) DAILY MARKET BRIEF 1:Swissie Sell-off Settles The SNB’s Business - Market News - 3 October 2019

(03 October 2019 ) DAILY MARKET BRIEF 1:Swissie Sell-off Settles The SNB’s Business - Market News - 3 October 2019