- As such, our willingness to intervene has increased
- The upward pressure on the franc has increased once again
- The franc is sought after as a safe haven in times of uncertainty
- It is 2.5% stronger on a trade-weighted basis since the middle of December
- We are ready to counter a rapid and excessive rise of the franc currency
- Appreciation of franc in recent weeks is typical during times of uncertainty
- Higher energy prices mean inflation likely to rise more strongly in coming quarters
- But medium-term inflationary pressure is virtually unchanged
- We are still ready to use negative rates if necessary to meet our target
- Our mandate is clear in that we will use all tools necessary to achieve that
He’s getting straight to the point here and that is the kind of thing market players like to see. Sure, it won’t go down well with the US and their accusations of currency manipulation. But hey, this is something we all know is happening but often times never say out loud.
I reckon the SNB is being more vocal and serious this time in getting the message across as we are pushing the limits of their intervention appetite as well. With EUR/CHF sticking close to the pivotal 0.90 line, it is a real test of their pain threshold. At some point last week, it looked like the central bank might’ve let that go by when price fell below the figure level here.
Considering that they don’t want to dip back into unconventional monetary policy again yet, it just means that FX intervention is the only play to counteract further deflationary pressures in Switzerland. You can bet that the SNB cannot wait for this whole Middle East conflict to be over and done with. It really has been a rather untimely incident for them.
This article was written by Justin Low at investinglive.com.
