Goldman Sachs: "SNB to find relief from weaker CHF"

In its latest report, analysts at Goldman Sachs offer their thoughts on the recent depreciation seen in the Swiss franc and its implication for the SNB.

Key Quotes:

“The Swiss Franc ... after exhibiting appreciation pressures up to the end of June, it has weakened almost 4% versus the EUR and between 5% and 6% against NOK, SEK, CAD and AUD, but just about 1% versus the USD.

We interpret the moves in CHF crosses as largely driven by the 'other leg of the cross' rather than changes in the Swiss economic outlook or the SNB's monetary policy stance.

The SNB should stay the course for now and developments in other G10 economies may well mean that the recent weakness in CHF extends further.

Even though the Swiss economy faces financial stability concerns that are not dissimilar to those faced by the Canadian economy, we do not expect the SNB to change its stance in the near term, unlike the Bank of Canada.

Importantly for the currency outlook, the SNB has reiterated its view that the Swiss Franc is significantly overvalued in its Quarterly Inflation Report, published at the end of June, and has continued to intervene in the FX market to contain currency strength.”