Swissie Rises To New Record, EURCHF Trades Below 1.37, Swiss National Bank Still MIA
Update: EURCHF stops taken out, as pair drops to fresh intraday low of 1.3683.
As the CHF hits new record highs, the SNB's Hildebrand must be scrambling with both hands tied. Instead, he is trying to deflect attention by pointing out the glaringly ridiculous, i.e., that "stress tests will restore market confidence." The man sure has his Geithner talking points down. Oddly enough, there was not one mention of what everyone was hoping to hear - the fact that the SNB has recently become nothing but a vehicle for currency manipulation.
From Market News:
The decision by the various EU governments to publish the results of their respective bank stress tests in the latter half of July will help to foster market confidence and assist European banks in their capital-raising efforts, Swiss National Bank Chairman Philipp Hildebrand said on Monday.
"Indeed, one of the reasons investors currently appear to underweight European banking stocks may very well be related to the fact that there is insufficient transparency about bank balance sheet conditions in Europe," Hildebrand said in a speech to be given in Zurich. "Credible stress tests can remedy this problem."
Hildebrand saw the current debt crisis as "multi-layered" and called it "a crisis of market confidence". The reaction in financial markets was "a wake-up call" to countries to put their finances "on a sustainable path", he added.
He also called it an "institutional crisis", which clearly demonstrated that the institutional mechanism to ensure fiscal discipline within the EU was "insufficient".
"The EU authorities and governments of the member states will have no choice but to take decisive steps to address the underlying institutional flaws that led to the current debt crisis in Europe," Hildebrand said.
Turning to the Swiss economy, the SNB chairman reiterated that the risk of deflation in Switzerland has passed, but, should the threat of deflation return, the SNB stands ready to do "whatever it takes" to ensure price stability in the medium and long term.
"Overall, today the outlook for the Swiss economy remains a favourable one," Hildebrand said. However, he also noted the downside risks to economic activity, which have grown due to the recent tensions in financial markets.
"Should these downside risks materialise and, via an appreciation of the Swiss franc, lead to a renewed threat of deflation, the SNB would take all the measures necessary to ensure price stability," Hildebrand said, repeating comments made following the central bank's rate decision last week.
So far no measures, necessary or otherwise have been taken. We will keep you posted as soon as the SNB gets involved once again.