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Brexit remains a key CHF risk – Danske Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 25, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Christin Tuxen, Senior Analyst at Danske Bank, suggests that in the event of Brexit (not our base case) the knee-jerk reaction would most certainly be for FX markets to send EUR/CHF lower.

    Key Quotes

    “Due to: i:) the negative impact for EUR crosses generally, ii:) a flight to the traditional safe-havens such as JPY and CHF.

    SNB would likely use intervention as a first means of leaning against EUR/CHF downside but in the event of sizeable CHF inflows, which it would require a large-scale build-up in the FX reserve to go against, we believe the SNB will take the opportunity to charge negative rates on a larger share of sight-deposit accounts (i.e. employ the so-called ‘nuclear option’). This – coupled with intervention – should ensure that EUR/CHF does not see a sustained dip below 1.05.”
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