Like Florida weather, the Swiss National Bank can’t make up their mind about whether they want to intervene in the currency market or not. Last week, the Swiss franc collapsed after SNB Vice President Hildebrand said point blank that “they could also intervene in the currency markets to prevent “renewed appreciation” of the franc. This morning SNB Roth shot down speculation about intervention by saying that he has yet to see the franc “overshoot” and there is no need for the central bank to intervene.
Physical intervention by the SNB was very unlikely since the central bank once did a study touting the effectiveness of verbal intervention. Furthermore, a study in 2003 revealed that the interventions of the SNB to strengthen the Swiss franc were more effective than its interventions to weaken the Swiss
The SNB also signaled this morning that rate cuts are over. Roth said that monetary policy is currently “appropriate.”
These comments have taken the air out of EUR/CHF and will probably drive it back towards 1.4825.