Swiss Central Bankers are on high alert are ready to intervene should the EUR lose further value and bring the cross rate closer to the 1.20 franc per euro. This cross rate is critical for many global business heading their business outside of Switzerland and banking in the tax sanctuary.
The steady growth in the currency causes severe disruptions in the inbound flow money and affects price stability across Switzerland and extends deflationary risks. “We continue to stand ready by unlimited currency purchases if necessary,” Thomas Jordan said from the SNB. The SNB was able to hold the SFR down without interference for 2 years but has set a cap for the minimum exchange rate at 1.20 for the pairing with the EUR.
Long trades on this currency are bound to reap rewards around and below the 1.240 rate for this pair as the SNB has made it clear that they have full intention of stepping in when the minimum exchange rate is realised at 1.20 francs per euro.