Jonathan Webb, Head of FX Strategy at Jefferies Bache, on the Swiss Franc
The SNB has been defending the EUR/CHF ceiling for a year. In your opinion is this policy beneficial and does it justify the unlimited Euro purchases, meaning an increasing SNB's exposure to the EUR?
Yes, I believe it is justified and it is very important, given the size of the capital flows that the SNB stepped into the market.
How long do you think the SNB will defend the ceiling?
As the Swiss economy weakens and deflation gets established in Switzerland, the Swiss Franc will weaken on its own accord, particularly if the recent ECB’s bond-buying policy is successful in stabilizing the Eurozone.
There is speculation that EUR/CHF ceiling might be shifted to around 1.22-level. What do you think about this?
I guess that it is unlikely to happen. In my opinion it is more likely that the Swiss Franc will start to weaken. The SNB would like the EUR/CHF to be away from the floor, thus pushing the floor up to 1.22-level increases a risk that they will have to intervene again.
What is your personal forecast for the SNB's decision concerning EUR/CHF ceiling?
I think Switzerland’s central bank will leave it unchanged, but in my opinion the EUR/CHF will go up. In the very end, I think, SNB may raise the floor, but after the EUR/CHF will move higher.
In your opinion what other measures might be implemented to reduce pressure on the currency?
The most important thing for them is actually the Eurozone, over which they have got no control. In terms of what the SNB can do, in my opinion, they could lead to quite negative deposit rates. However, to my mind at the moment they prefer just maintaining the same policy.
How would you evaluate the Swiss Franc performance against its counterparts?
Because of the tight link, it is basically being forced to follow the Euro, whenever it is going. However, I think that might change, as the Swiss Franc may start to weaken on its own accord.