The Swiss National Bank maintained the peg of the franc to the euro in the quarterly meeting. The expected move came despite a surprising rise in employment and an even more surprising rise in growth: the economy grew by 0.6% in Q3, triple the early expectations.
Nevertheless, the SNB found a justification for the rise via another drop in prices: fighting deflation enabled the move that is already 16 months old. Despite a relatively flat EUR/CHF (just above 1.20), USD/CHF has improved its technical “behavior”.
* This article is part of the January 2013 monthly forex report. You can download the full report by joining the newsletter in the form below.
During January, the peg might be challenged due to a weaker euro. As aforementioned, the weakness of the single currency could come from the weakness of the core rather than from the debt crisis. In addition, the ECB could join the currency wars.
For any sign of a change in future policy, it is important to note the CPI release on January 11th. Without a rise in prices, the SNB is likely to leave its policy unchanged – a policy that has been very successful.
The release of the foreign currency reserves report will also shed some light on the situation at the central bank, but these figures are more important for other currencies – the diversification of the of the SNB from euros to other currencies has a significant impact on them, but not on the franc.
Another release worth following is the retail sales report on January 16th, which will show how the economy is doing.
As always, it is important to note that nothing lasts forever and that the levee could break. The SNB was lonely on the big for many months.
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