(This is an excerpt from an article I originally published on Seeking Alpha on September 18, 2014. Click here to read the entire piece.)
With the Swiss franc (FXF) trading closer and closer to its 1.20 floor versus the euro (FXE), I find myself more interested than usual in the monetary policy decisions of the Swiss National Bank (SNB). In its September policy decision, the SNB starts off with the ominous observation: “The economic outlook has deteriorated considerably. The Swiss franc is still high…For Switzerland, the risk of deflation has thus increased again…”
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In line with this downgrade, the SNB has dropped its inflation forecast starting in mid-2015 because of “…the deterioration in the global economic outlook and slower growth in Switzerland.”
Source: Swiss National Bank
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Source: FreeStockCharts.com
Given the recent bounce, it seems the market is still not ready to test the SNB’s resolve to “purchase foreign currency in unlimited quantities” and if needed “take further measures immediately” to protect the 1.20 floor. {snip}
Be careful out there!
Full disclosure: short the Swiss franc
(This is an excerpt from an article I originally published on Seeking Alpha on September 18, 2014. Click here to read the entire piece.)