The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Swiss GDP numbers came out significantly better than economist’s had anticipated. Swiss exports which rose 3.9% QoQ and 9.5% YoY is the main driver for the beat. The fact the EUR/CHF gravitated between 1.07 and 1.0950 and USD/CHF traded close to parity during that period may have given the Swiss economy some respite.
SNB will closely watch ECB outcome next week
Over the coming days the focus will slowly shift to the ECB on the 10th of March. Considering the high expectations and the subsequent disappointment of last year, investors might be more cautious this time. Yet, there is a fair chance Draghi will not want to deceive the market twice in a row. Latest quotes from ECB members clearly point to an intervention in March. With European banks having seen their cost of debt rising fast, and the ECB wanting to stimulate credit, the latter will most likely want to back its financial system. We expect an increase of the QE size to at least 70B/month and an additional rate cut of 10 bp.
Thomas Jordan made it clear that the SNB will reassess its policy depending on the ECB outcome. Given our above expectations, it is fair to assume that the SNB will most likely cut interest rate further into negative as a response.
In addition, on Monday, the foreign currency reserves are going to be closely expected. In fact, given the recent path of the EURCHF, it will be interesting to see how this figure will come out. The last figure was 575.4bn but we can expect this figure to rise. It will help us assess if the drop in the EURCHF rate was softened by the SNB or if the institution did not intervene at all. In our opinion, it should have intervened and the Foreign Currency Reserves should have risen significantly.