Well, the euro is slinking back down again. At the moment it's given back more than 60% of Monday's Swiss National Bank driven gains. Talk in the market was that the SNB was buying euro and selling Swiss on Monday and that affected all Swiss franc and euro crosses.
As an aside just consider what a bunch of morons are over there at the SNB. They put on a peg, they take off the peg causing disaster for themselves and dealers and now they're back intervening again? Seriously? Guys and ladies...MAKE UP YOUR MINDS!
I've said it a zillion times: how do these people get these jobs?
Anyway, euro headed lower. Will be choppy all the way down, but eventually--maybe by September--we'll see parity (1:1) against the dollar and further down after that.
Europe's got problems. You don't need me to tell you that. The only way for Europe to stay solvent is for net exports to continue growing and with austerity in the U.S. and with Japan and China competing with Germany for the same export markets, you're going to see price cuts/lower prices and that is a de-facto devaluation in the euro.
#SellRallies
Mike it looks like what they do is they change out the Swiss firms who end up with EUR surpluses...
ReplyDeleteso the firms end up with CHF balances and the SNB takes over the firm's former EUR balances position...
As the SNB wants to "get a good deal" they want to pay LESS CHF for a EUR so less CHF per EUR is bullish CHF.... so CHF should rally off of this while it is going on...
then it stops and they leave it up to the member banks to set the exchange rate again and the CHF goes back down to where the firm's terms of trade had it formerly...
I still personally think they will eventually put the peg back on... they are still sitting on massive losses in the SNB forex account....
Or if the firms slash prices in USD or EUR terms by 15%, then the SNB wont have to return the peg, the firms will have done the work already via the terms of trade and EUR/CHF should be back to 1.2...
It depends on how desperate the Swiss firms become for foreign sales/sales increases and how hard they want to crack the whip to get their prices down in USD or EUR terms... the more desperate they become the more they want to crack skulls in order to lower the price they will offer their wares at in the USD or EUR terms >>>> CHF goes down... ie "race to the bottom"...
This would make the SNB's day as they will reap huge forex gains in their account....
rsp,