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Gold referendum tests SNB – ING

FXStreet (Barcelona) - The Research Team at ING sees pressure building up for negative rates whatever the outcome of the Gold referendum in Switzerland as Swiss citizens vote on the ‘Save our Gold’ referendum on 30 November.

Key Quotes

“Whatever the outcome of the referendum, we expect the 1.20 EUR/CHF floor to hold and the pressure for negative CHF rates to build further. SNB could perhaps even surprise in December once the referendum risk had passed.”

“The SNB is a much respected institution in Switzerland and its strong opposition to the referendum should resonate further with voters. We expect a No vote.”

“We very much doubt the SNB is going to let the floor go at 1.20. However, we doubt it wants to undertake massive FX intervention at 1.20, since FX reserves are already unwieldy at 70% of GDP – the largest in the world.”

“Instead, we believe the chances of negative CHF rates are growing.”

“Alternatively, the SNB could and perhaps should more formally target negative interest rates. The negative rates being charged on EUR deposits are encouraging working capital and deposit balances to be deposited in the likes of the CHF (and the USD) and removed from the EUR.”

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