Bloomie’s thoughts on the INTERVENTION policies we’ve seen the last few days.
Concludes – Unilateral action will not alter the long term trend {http://bit.ly/pZWisX}
We have just seen the SNB cut rates to zero and the Japanese authorities engage in unilateral FX intervention. These actions are aimed at halting or reversing the currency appreciation both have seen in recent months.
These moves are a response to the insatiable market appetite for safe haven assets. With the end of QE2 in the US, investors were hoping we would begin to see the end of the crisis. Instead we have had an intensification of the Eurozone bond crisis, a bitter US political stalemate on how to deal with an unsustainable fiscal position and a slowdown of the global economy. The perception is now that after four years we are still in the middle of the crisis and nowhere near the end. This complete change in sentiment from only a few months ago has moved the markets onto the defensive. No amount of unilateral intervention will be able to change the dire underlying situation. Unless we have full blown coordinated action, the Japanese and Swiss will ultimately fail.
HSBC Global Research