"The risk of less favorable global economic developments has decreased somewhat compared to the last quarter. Nevertheless, structural problems in Europe persist, which could cause new tensions on the markets."
-Thomas Jordan, the Swiss National Bank President
As it was widely expected Swiss policy makers stayed pat on its monetary policy, and once again assured the cap on domestic currency is still essential. The Swiss National Bank under Thomas Jordan leadership decided to keep its ceiling on the Franc at 1.20 per Euro, while also leaving the benchmark interest rate between zero and 0.25%. Though the Franc lost 2.2% versus the single currency this year, it is still considered as the overvalued currency, as it is more than 20% higher than in September 2008, when Lehman Brothers collapsed. Despite some improvement in the Eurozone, structural problems still persist and taking into account low inflationary pressure in Switzerland, the SNB is expected to defend the cap with unlimited market interventions in order to protect the economy for as long as it is needed.
In a separate report the Swiss customs office reported Swiss trade balance narrowed in August, as exports plunged on declining trade with the nation's largest trade partner- European Union. The trade balance surplus stood at 1.85 billion francs last month, down from 2.49 billion recorded a month ago. Shipments from the Alpine country slipped 4.6% in real terms to 14.652 billion in the corresponding period. Though it was partially to one less working day, the country's biggest export category- pharmaceuticals and chemicals, fell 1.8%, while machines and electronic turned lower 2.6%.
© Dukascopy Bank SA