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Squaring up to the SNB

Ever since the introduction of the floor on EUR/CHF at 1.20, there has been a relatively comfortable relationship between the market and Swiss central bank. But with the euro having struggled this year on the majors, EUR/CHF has nudged ever closer to the line in the sand, CHF up 0.80% so far this year with just a further 0.55% appreciation required to hit 1.20 on EUR/CHF. Read more

26/01/2012 @ 12:18 GMT

Euro-muddle

Monday saw so many competing forces at work in the single currency that at times it was difficult to know where to look. For the euro bears, there was the revelation that ECB funding to Italian banks reached an astonishing EUR210bn last month (up EUR57 bn from November), the news that Greek industrial production collapsed by 8% YoY in November, some speculation that the ECB will cut rates by 25bp on Thursday and the announcement that investors are now prepared to pay the German government to own their treasury bills. Read more

10/01/2012 @ 07:09 GMT

SNB forecasts suggests more work to do

The SNB kept the floor on EUR/CHF at 1.20, but its forecasts suggest there is likely more to do on the currency front if deflation is to be avoided on a sustained basis. For next year, the SNB expects the economy to grow a mere 0.5% and expects inflation of -0.3%, rising to 0.4% for 2013. The SNB bases these forecasts on maintaining zero rates and a depreciating CHF. The question naturally arises as to how likely the latter assumption is and whether it comes about from market developments or whether the SNB has to move the EUR/CHF floor higher so as to push the CHF lower. Read more

15/12/2011 @ 07:16 GMT

Dollar dominance

Although the euro’s decline below 1.30 is attracting much of the attention in FX markets, it is actually the continuing surge in the dollar which ought to be generating just as much interest. The dollar index jumped to 80.5 yesterday, not that far from the high for the year recorded in the first few days of January. Since the end of October, the dollar index is up by more than 7%, a very significant move for the world’s major reserve currency. Dollar demand over the past couple of months has been very pronounced for a number of different reasons. Read more

15/12/2011 @ 06:32 GMT

The growing SNB gamble

The data this morning from Switzerland highlighted the dilemma the SNB (Swiss National Bank) is facing at its quarterly policy meeting, the results of which are due to be announced tomorrow. Producer and import prices were down 0.8% MoM, with the annual rate falling further into negative territory from -1.8% to -2.4% YoY. This follows on from the latest CPI data, which showed prices declining -0.5% on an annual basis. The key question for tomorrow is whether we see a change in the EUR/CHF floor from the current 1.20 level that was set back in September. Read more

14/12/2011 @ 09:37 GMT

SNB must be audacious again

September’s audacious move by the SNB to impose a ceiling of 1.20 on EUR/CHF needs to be repeated when it meets next week to review monetary policy. This morning’s CPI data will only reinforce the concerns that a number of SNB officials have expressed recently; consumer prices fell 0.5% YoY last month and the economy appears to be lurching back into recession, dragged down by a still overvalued exchange rate and Europe’s economic disintegration. With interest rates already essentially at zero, the SNB must be considering a further increase in the ceiling. Read more

06/12/2011 @ 08:59 GMT

SNB likely to lift EUR/CHF ceiling to 1.30

SNB policy-makers meet on December 15th for their quarterly assessment of monetary policy and at the top of the agenda will be by how much to adjust the EUR/CHF ceiling of 1.20. Since that time, it has become abundantly clear that the economy is really suffering from the strength of the exchange rate; business and consumer confidence has slipped markedly, real retail sales fell by 0.2% YoY in October, consumer prices are now declining and there is a strong prospect of recession in the first half of next year. Read more

05/12/2011 @ 12:43 GMT

SNB – what are you waiting for?

Repeated verbal warnings from various SNB officials over the past week regarding their undying determination to prevent further Swissie strength have been mildly effective, but need to be followed up with action soon or else the market will start to call their bluff. Read more

10/11/2011 @ 10:11 GMT

Sterling’s usurping of the Swissie

The reaction of other currencies to this morning’s pressure on Italy has been telling. The dollar is stronger against almost every one of the majors, with the yen holding up the best. Sterling and the Swissie are also holding up relatively well, both having appreciated vs. the euro during the morning. The issue for the Swissie is that the SNB’s decision to do whatever it takes to defend the 1.20 level on EUR/CHF is not without costs. Read more

09/11/2011 @ 12:16 GMT

More Swissie selling

Notwithstanding the incredibly troubling developments in both Italy and Greece, the Swissie has experienced some significant selling pressure overnight in both Asia and again in Europe this morning. Not helping the mood was the news out earlier that inflation in Switzerland fell 0.1% both MoM and YoY in October, much weaker than expected. Clearly, the strength of the exchange rate has contributed to significant downward pressure on prices, to the point where the Swiss economy is now experiencing deflation. For the SNB, this development will be of deep concern. Read more

07/11/2011 @ 11:04 GMT

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