The Swiss National Bank (SNB) reported an increase in total sight deposits for the week ending 19 September, with figures reaching CHF 472.3 billion compared to CHF 468.5 billion previously. Domestic sight deposits also rose to CHF 445.1 billion from the previous CHF 441.7 billion. This uptick aligns with trends observed since the June monetary policy decision.
Several economic updates are impacting the market. Notably, the Financial Times reported a potential US tariff on EU goods, affecting the EUR/USD rate. Meanwhile, European stocks opened lower, and gold achieved a new high before possible US data impacts. Major currencies are showing limited movement as the new week begins.
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The continued rise in sight deposits suggests the Swiss National Bank is actively selling francs in the market. This is a familiar pattern, often used to prevent the franc from strengthening too much during times of European uncertainty. We are seeing this now as concerns over new EU tariffs are pushing investors towards safe-haven assets.
This central bank action, combined with political headlines, is creating a tense environment for the EUR/CHF currency pair. Three-month implied volatility for the pair has already climbed to 8.2%, up sharply from the summer average of 5.5%. Traders should anticipate that price swings could become more pronounced, not less, in the coming weeks.
Market Dynamics And Speculations
The SNB’s intervention effectively creates a soft floor for EUR/CHF, making aggressive bets on a stronger franc very risky. We saw a similar dynamic in the 2012-2014 period, where fighting the central bank was a losing strategy. This suggests that selling out-of-the-money puts on EUR/CHF could be a way to collect premium from the elevated volatility, assuming the SNB holds its line.
The flight to safety is clear, with gold hitting new highs and equities starting the week on the back foot. Looking at positioning data from last week, we saw that speculative net-long positions in the franc had reached their highest level since the second quarter. This broader risk-off mood reinforces the SNB’s motive to intervene, as a stronger franc would hurt the Swiss export-driven economy.
