Forex Flash: Has the SNB been buying NOK? - Nomura
FXstreet.com (Barcelona) - With the SNB Quarterly Monetary Policy Assessment ahead, Geoffrey Kendrick, Strategist at Nomura suspects that the bank may have been buying NOK.
He writes, "On Thursday the SNB will hold its quarterly Monetary Policy Assessment, which includes speeches from the three Governing Board Members at this meeting. We think the market is marginally pricing a new extreme measure by the SNB (such as negative labor rates), something we think is highly improbable. Hence, we would recommend going into the meeting short EURCHF."
However, Kendrick believes that more importantly, the speeches will be watched for any update in whether new currencies have been added to the FX reserve basket. He notes that historically the bank has followed strict liquidity and ratings criteria when adding new currencies in the past which would leave NOK as a possible inclusion as it is as liquid as SGD and retains a strong AAA status. He finishes by noting that when SEK's inclusion was announced, EURSEK fell 0.5% on the day.
He writes, "On Thursday the SNB will hold its quarterly Monetary Policy Assessment, which includes speeches from the three Governing Board Members at this meeting. We think the market is marginally pricing a new extreme measure by the SNB (such as negative labor rates), something we think is highly improbable. Hence, we would recommend going into the meeting short EURCHF."
However, Kendrick believes that more importantly, the speeches will be watched for any update in whether new currencies have been added to the FX reserve basket. He notes that historically the bank has followed strict liquidity and ratings criteria when adding new currencies in the past which would leave NOK as a possible inclusion as it is as liquid as SGD and retains a strong AAA status. He finishes by noting that when SEK's inclusion was announced, EURSEK fell 0.5% on the day.
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