"The minimum exchange rate is very important. It remains a crucial tool of our monetary policy in order to avoid a tightening of monetary conditions in Switzerland"
- Thomas Jordan, SNB President
On Monday the Swiss Franc was traded around 1.235 versus the single currency, a level which is 350 pips higher than the cap imposed by the Swiss National Bank in September 2011. The Eurozone has emerged from its longest-ever recession and the demand for the Franc eased. Nevertheless, Swiss authorities once again reiterated the necessity to keep defending the currency ceiling, which had helped to prevent economic slowdown and even avoid falling into recession, and said the cap remains vital to avoid tightening of current monetary conditions.
While some economists may consider that Alpine economy is on the path of sustain recovery, a report from the Federal Statistical Office showed that producer and import prices stagnated last month. The PPI, which measures the change in the costs of goods and raw materials acquired by manufacturers, remained unchanged on an annual basis, and inched up only 0.1% from a month earlier. Analysts, however, expected a 0.3% gain on a monthly basis. The latest fundamental data is suggesting that even despite some improvement in the country's biggest trading partner, 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.
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