"You have a relative growth play that favours the Swissie over the euro. Markets are positioned for a boring SNB meeting Thursday with no change in band and total commitment to the main exchange rate, yet the data continues to improve."
- Peter Rosenstreich, chief foreign-exchange analyst at Swissquote Bank SA
The Swiss National Bank is determined to defend its cap on the Swiss Franc, imposed in September 2011, for as long as it is necessary. This fact is clear to any person, who follows fundamental data or simply announcements from central bankers. At the same time, this policy and rates between zero and 0.25% have fuelled property prices, and the real-estate market is living through its biggest boom in two decades. Earlier this year the SNB has already forced domestic banks to hold more capital in order to temper the demand for property. However, this initial step on its own is unlikely to be enough to prevent a bubble from forming and additional measures would be needed.
An increase of interest rate is not considered to be a possible option, as the SNB targets to maintain the cap of 1.20 per single currency, which was implemented to avoid the economy falling into recession and so far, it has definitely, contributed to economic growth. The second and most likely option for the SNB is to raise the government-mandated buffer, which currently stands at 1%, and according to the majority of analysts, the central bank can require banks to hold as much as 2.5% extra capital on their mortgage-related assets. Regarding the supply, the number of apartments for sale that costs more than 1 million francs doubled since 2008, while the total number of on offer climbed only 10%.
© Dukascopy Bank SA