The Swiss National Bank (SNB) announced that total sight deposits increased for the week ending September 19, rising to CHF 472.3 billion from CHF 468.5 billion. Domestic sight deposits also grew, reaching CHF 445.1 billion up from CHF 441.7 billion. This growth is in line with trends observed since the monetary policy decision in June. Several economic updates are influencing the market. The Financial Times highlighted a possible US tariff on EU goods, which could affect the EUR/USD exchange rate. Additionally, European stocks opened lower and gold hit a new high before potential impacts from US data. Major currencies are showing limited movements as the week begins.

Understanding Risks

Trading in foreign exchange carries significant risks. Leverage can worsen losses, so only invest money you can afford to lose. It’s crucial to understand these risks and seek professional financial advice. This information is for educational purposes and doesn’t count as investment advice. Remember, past performance does not guarantee future gains, and you may encounter advertising on the site. The continued increase in sight deposits indicates that the Swiss National Bank is actively selling francs in the market. This strategy helps prevent the franc from strengthening too much during uncertain times in Europe. Current concerns about new EU tariffs are driving investors toward safe-haven assets. This action by the central bank, combined with political news, is creating a challenging situation for the EUR/CHF currency pair. The three-month implied volatility for this pair has jumped to 8.2%, up sharply from the summer average of 5.5%. Traders should prepare for potentially larger price swings in the weeks ahead.

Market Dynamics and Speculations

The SNB’s intervention is creating a cushion for EUR/CHF, making aggressive bets on a stronger franc risky. We saw a similar situation from 2012 to 2014, where opposing the central bank was typically unwise. This suggests selling out-of-the-money puts on EUR/CHF might be a way to gain from the heightened volatility, provided the SNB stays the course. The trend toward safety is evident, with gold reaching new highs and stocks starting the week on a low note. Last week’s positioning data showed that speculative net-long positions in the franc hit their highest level since the second quarter. This overall risk-averse atmosphere reinforces the SNB’s reasons for intervening, since a stronger franc could negatively affect the Swiss export-driven economy. Create your live VT Markets account and start trading now.

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