EURCHF to 1.50 in 2012?

[Kristianto]

Switzerland’s persistency in fighting the appreciation of its currency will continue to pay off in 2012. After the dramatic failure of direct FX intervention in the market in 2009 and 2010 and after EURCHF threatened to destroy the Swiss economy with its death spiral towards parity in mid-2011, the Swiss National Bank and Swiss government finally joined forces to engineer an aggressive expansion of money supply and established a floor in EURCHF at 1.20. With Swiss fundamentals – particularly export related – continuing to suffer mightily in 2012 from past CHF strength, the SNB and government bear down further to prevent more collateral damage and introduce extensions to existing programmes and even negative interest rates to trigger sufficient capital flight from the traditional safe haven of Switzerland to engineer a move in EURCHF as high as 1.50 during the year, much to the chagrin of those who believe central banks can’t intervene successfully.

 

About Outrageous Predictions

In its Outrageous Predictions, Saxo Bank focuses on events that are unlikely to happen, but at the same time are far more likely than the market appreciates. The predictions are not meant as forecasts, but it is important for investors to consider events with under-recognised probabilities. Should any of them come to pass, they would have a significant impact on the markets.

 

- John Hardy, Saxo Bank