Forex Fundamental Video - SNB Pulls out its Intervention Bazooka, Imposes Ceiling of 1.20 in EUR/CHF
The Swiss National Bank unveiled their bazooka today, pledging to keep the EUR/CHF above the 1.20 level with unlimited intervention. The announcement and intervention caused the EUR/CHF to climb 1000 pips in the overnight session, from near 1.10 to 1.20. How much strain will it put on the SNB this time to keep the currency from appreciating? Will the SNB be committed even if the losses begin to pile up like a year ago? The currency will still be sought for its safety, and as long as the Euro-zone sovereign debt situation is not fixed, the demand for CHF will remain. Therefore it will be an endurance contest between the central bank and traders - especially if the global and financial outlook continue to remain downcast. This will also put pressure on the BOJ as any limiting factor in sending safe haven flow to CHF would divert money to the Japanese Yen. Japanese authorities may be forced to intervene as well, leaving really only the USD as a safe-haven currency that isn't being manipulated (well, let's see if we get QE3).
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