SNB to keep cap

Note: This section contains information in English only.
Source: Dukascopy Bank SA
"There will be no official announcement of the SNB on that. It wouldn't be very clever to announce you're giving up the cap. It would be too easy for the investors who are betting against it."
 - Manuel Ferreira, a portfolio manager at Zuercher Kantonalbank


With EUR/CHF trading comfortably above the 1.20 level, the SNB can feel almost no pressure until there is a need for market intervention. Nevertheless, domestic economy is sending worrying signs time to time, suggesting the cap is still needed. It seems that strong domestic consumption cannot boost growth on its own as due to a drop in exports of pharmaceuticals, chemicals and machinery the Alpine country almost stalled in the final quarter of 2013.

According to a report from the Federal Statistics Office, Swiss gross domestic product expanded 0.2% in the three months through December from the prior quarter when the growth stood at 0.5%. According to economists, Swiss policymakers will stick to the chosen course for at least another year, providing a chance to read up on their history for ideas on abandoning the cap. Vast majority of respondents in the poll conducted by Bloomberg, showed the SNB will eliminate the cap of 1.20 per euro in 2015 at the earliest. Almost a half, however, believe it will be kept until 2016. The next monetary policy meeting is scheduled for March 20, where no changes are expected to be made. The three-member board will most likely leave the benchmark rate at zero and leave the defence on the Franc unrevised. Amid improving economic conditions in the Eurozone, the pressure of the Franc will wane, and the currency will weaken, providing additional boost to Swiss exporters. The minimum exchange rate has been in place since 1978.
© Dukascopy Bank SA

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