Thomas Jordan, the governor of the SNB, explains the dramatic decision to end the floor of 1.20 under EUR/CHF.
He mentions the divergence in global monetary policy (which is set to continue) and explains that the lower negative deposit rate is supposed to mitigate the decision to end the cap.
Important: Jordan refuses to comment on communication with other central banks
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The move was made due to international developments. It just did not make sense to keep the cap. The Bank to took its time with the decision. Jordan stresses it was not a panic move, but had be a surprise. He acknowledges that markets were not expecting it and that a big market movement was predicted by his institution.
The Swiss economy has adapted to forex levels, says Jordan. Well, it has to adapt to new ones as well. Swiss stocks are plunging.
Jordan expects the franc’s strength to ease from current levels and the situation to correct itself over time.
Intervention in markets is set to continue if necessary but he refuses to comment on specific market transactions.
EUR/USD is battling 1.17, the launch rate, but is currently below this level.
EUR/CHF is trading below 1.03 and USD/CHF around 0.8750.
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