Swiss Puzzle, German Answer
The Swiss franc has weakened sharply this week. EURCHF has jumped from levels just above the Swiss National Bank’s ‘minimum’ floor of 1.20 to above 1.23 while USDCHF has appreciated back towards 0.95 the figure.
There has been speculation that the SNB would raise its floor target to 1.25 in EURCHF. We believe the central bank has no intention of ‘fine-tuning’ its exchange rate policy given continuing deflation in Switzerland, uncertainty about the Eurozone’s debt crisis and the risks that such a move would invite international criticism. Instead the weakness of the franc may reflect Germany’s slowdown. This week’s German PMI and IFO business conditions data were all worse than expected.
Click here to read the full report: UBS
UBS