Swiss franc has been virtually untradeable since the SNB intervention

Swiss Franc Outlook : The franc has been virtually untradeable since the SNB intervention last week, trading sideways in a narrow band of about 1.1800-1.1900 against the US dollar. We detect a tiny bias to the upside for the dollar, although that could be corrective on "pullback Tuesday." Yesterday SNB Pres Roth said the bank will act again if the Swiss franc rises too much against the euroexchange rate. Since the euro rate is on a rising trend against the US dollar exchange rate, his words have implications for the USD/Chf pair, too. Roth said, according to the FT, "We would be foolish, as a small and open economy, to try to gain competitiveness through the currency. This is not a beggar-thy-neighbour policy. It's just to protect the Swiss economy from deflation,"he said." Well, the usual route would be to print money, not intervene in the currency market. But Roth says "Although we have lowered interest rates aggressively since October, all our actions have ... been neutralised by foreign exchange developments. We concluded we had to do something. We have consistently said we will prevent a strengthening of the Swiss franc."

Separately, or maybe not, the Swiss government announced a new GDP forecast for a contraction of 2.2% this year and barely-there growth of 0.1% in 2010. This more than doubles the Dec forecast. According to Bloomberg, Q4 contraction was 0.3%, with industrial production shrinking 5.9%. Exports will drop 8.1% this year, with investment down 10% and the unemployment rate up to 5.2% in 2010.

Pounds to Swiss Franc = 1.6500

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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