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11 Nov 2014
Do not fight the SNB - MP
FXStreet (Barcelona) - Dean Popplewell, Director of Currency Analysis and Research at MarketPulse notes that upcoming SNB referendum could force the Swiss central bank to “rip apart its monetary policy rules.”
Key Quotes
“A handful of traders have been ignoring that rule and are quietly buying CHF, three weeks ahead of a SNB referendum that could force the Swiss central bank to “rip apart its monetary policy rules.”
“The EUR/CHF (€1.2025) currently sits atop of its 26-month low – the highly publicized lower limit that has been guarded by the SNB (€1.2000). This is the psychological “line in the sand” that Swiss central banker’s declared that under no circumstance would be breached, a policy that was introduced three-years ago to prevent the market from trading a ‘stronger’ CHF.”
“Under the new rules (if voted in), would require the SNB to buy gold to balance any EUR purchases. It’s no wonder that Swiss policy makers oppose this particular motion as it would “tie policy makers hands” when trying to conduct standard monetary policy.”
“There is added pressure on the SNB to defend, especially with the ECB expanding its balance sheet and looking at other assets it can purchase, within its mandate – the downward pressure should be expected to increase, and by default, even more pressure will indirectly be put on the SNB.”
“A “yes” vote will only invite more aggressive speculation – the SNB would be left with few teeth to weaken the CHF.”
Key Quotes
“A handful of traders have been ignoring that rule and are quietly buying CHF, three weeks ahead of a SNB referendum that could force the Swiss central bank to “rip apart its monetary policy rules.”
“The EUR/CHF (€1.2025) currently sits atop of its 26-month low – the highly publicized lower limit that has been guarded by the SNB (€1.2000). This is the psychological “line in the sand” that Swiss central banker’s declared that under no circumstance would be breached, a policy that was introduced three-years ago to prevent the market from trading a ‘stronger’ CHF.”
“Under the new rules (if voted in), would require the SNB to buy gold to balance any EUR purchases. It’s no wonder that Swiss policy makers oppose this particular motion as it would “tie policy makers hands” when trying to conduct standard monetary policy.”
“There is added pressure on the SNB to defend, especially with the ECB expanding its balance sheet and looking at other assets it can purchase, within its mandate – the downward pressure should be expected to increase, and by default, even more pressure will indirectly be put on the SNB.”
“A “yes” vote will only invite more aggressive speculation – the SNB would be left with few teeth to weaken the CHF.”