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14 Nov 2014
Gold referendum irrelevant for EURCHF floor - TDS
FXStreet (Bali) - Martin Schwerdtfege, FX Strategist at TDS, notes that the Gold referendum should be irrelevant for EURCHF floor.
Key Quotes
"In all, as long the SNB is committed to enforcing its EURCHF floor, the approval of the Gold Initiative should have no bearing on its ability to enforce it under the current deflationary environment in which the Swiss economy is operating – things will be different when the time comes to shrink the central bank's balance sheet."
"After all, as long as unsterilized balance sheet expansions continue to be justified by the country's tepid inflation outlook, there is not internal inconsistency between the SNB's monetary policy objective and the policy instrument it has chosen to pursue it."
"Therefore, we think betting against the SNB’s ability to sustain the floor could well turn into a futile exercise."
Key Quotes
"In all, as long the SNB is committed to enforcing its EURCHF floor, the approval of the Gold Initiative should have no bearing on its ability to enforce it under the current deflationary environment in which the Swiss economy is operating – things will be different when the time comes to shrink the central bank's balance sheet."
"After all, as long as unsterilized balance sheet expansions continue to be justified by the country's tepid inflation outlook, there is not internal inconsistency between the SNB's monetary policy objective and the policy instrument it has chosen to pursue it."
"Therefore, we think betting against the SNB’s ability to sustain the floor could well turn into a futile exercise."