The Trump administration has spoken out against alleged currency manipulation from China, Japan and Germany. Yet the country most at risk of meeting the Treasury’s official criteria of currency manipulation is probably Switzerland.
The risk of coming into US focus, perhaps as early as 2018, could add to the rationale for the SNB to gradually discontinue market intervention.
…Hence, the SNB letting EUR/CHF fall toward parity to avoid friction with the US may be the lesser evil for the Swiss export-oriented industry than incurring US retaliatory measures, and it could join the financial sector in demanding an exit from unconventional policy. If speculators also upped the pressure, continued intervention would become ever costlier. Stay short EUR/CHF* via options.
*As a directional trade, DB is short EUR/CHF targeting 1.02.
*This trade is recorded in eFXplus Orders.
Copyright © 2017 DB, eFXnews™Original Article
