Meddlesome Swiss National Bank?By Arnaud Masset
Rumour is that the SNB has stepped up stop further CHF appreciation. Given the sharp appreciation of the Swiss Franc in the past couple of weeks, there is little doubt the bank will stand by and watch the CHF go to the moon. We believe the SNB won’t let the CHF fall below 1.15 per Euro, but we won’t know for sure until 5 February when the SNB releases its weekly report.
Last night, EUR/CHF’s price action was volatile as the CHF fell to 1.1630. This is below its peak of 1.1832 reached in mid-January. This peak was a treat for the SNB, but also short-lived. The CHF headed back down last week and hit a low of 1.1572 during the Asian opening. In the back half of 2017, the SNB reduced dramatically – maybe even phased out – FX intervention. Indeed, sight deposits at the SNB stabilized at around CHF 575 billion, down from a record CHF 579.7 billion of August 2017.
Japan slowly inflatesBy Vincent-Frédéric Mivelaz
The Bank of Japan is optimistic about medium- to long-term inflation reaching a 2%/year target, even though the rate at year-end 2017 was 1%.
Japan is showing improvement in private consumption. Tight markets pushed the Japanese government upward, with December unemployment expected to remain at 2.70%, a 24-year low. Consumer spending slowly increased, after Prime Minister Shinzo Abe declared in December 2017 that companies must raise wages by 3% or more. Japan’s December exports rose an annual 9.30% (slightly below consensus at 10.10%) and December imports were up 14.90%. This week we will be looking at December Retail Sales and Household Spending on Tuesday, and December Industrial Production on Wednesday.