written by: Jonathan Miller , Global Market Analyst
As the newest SNB Chairman faces relentless pressure following his
predecessor’s missteps, all eyes are on interim appointee Thomas Jordan
who seems to have a full plate. Besides dealing with the fallout of a
serious ethics violation and another blow to Swiss banking secrecy,
Jordan has rhetoric to maintain. Facing an exploding balance sheet, he
must decide how to steer the ship as the EURCHF rapidly approaches the
proverbial “line in the sand” drawn by his predecessor at €1.20. With
liabilities rising and losses from maintaining the currency peg
continuing to skyrocket, the SNB war against speculators might be
rapidly approaching its end.
Currency pegs and artificially setting exchange rates have proved
ineffective, most notably in the Bank of England’s quest in the early
90s that resulted in massive profits for George Soros. The SNB will
likely be ramping up rhetoric in the next hours and days as the threat
of action is often more effective than the action itself (note recent
activity from the Bank of Japan). Speculators can play this war of
attrition longer than the SNB as they have far greater ammunition at
their disposal, plus the luxury of time. As the EURCHF tests 1.2040 the
next support level is at 1.2025 and from there the SNB’s resolve will
ultimately be tested at the 1.20 level.
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