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Increasing possibility of a policy response by the SNB - Nomura

FXStreet (Bali) - There is an increasing possibility of a policy response by the SNB, notes the Strategy Team at Nomura.

Key Quotes

EUR/CHF has been trading weakly. We expect the Swiss National Bank (SNB) to be more dovish at its next monetary policy meeting on 18 September, at least in terms of its inflation forecast."

"The likelihood of an SNB policy response is also rising, even though a response is dependent on EUR/CHF movements into the meeting."

"Historically, traditional reserve currencies such as USD and JPY tend to perform strongly after SNB intervention in the FX market."

"This may be explained by a typical risk-off environment, when the SNB is forced to intervene in the market and there are market expectations of FX reserves being reallocated."

"In fact, NOK and NZD, which are not specifically included in the SNB’s FX reserves, tend to underperform against other European G10 FX and AUD respectively."

"We currently recommend having CHF short exposure against USD in our USD long basket. USD/CHF long positions into the two central bank meetings in the next two weeks look attractive."

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