Trade idea of the week: Short EUR/CHF – Deutsche Bank

Deutsche Bank Markets Research team recommends short EUR/CHF as a G10 trade idea of the week. The idea is based on expectation for the SNB to withdraw from the market by Q1 of next year.

Rationale

The improving economic backdrop may no longer justify the growing costs to the banking sector from balance sheet expansion. And the cost of withdrawal should be limited: light positioning in the currency market means the franc would appreciate if the SNB withdrew, but not on the scale of January 2015. Cantonal payments in January 2016 still make it unpalatable for the SNB to suffer losses from a falling EUR/CHF for now, but it will be much easier to withdraw thereafter.