We have recently noted the increasing pressure on the Swiss National Bank (SNB) over its peg [6] to the EUR in the midst of a capital flood from Europe. The slow bleed strengthening of CHF against EUR had many concerned the SNB would be forced (by exogenous factors) to adjust the peg. But, this morning, it appears they tried to draw a red line... CHF has plunged after SNB's Mosler said negative interest rates remain an option should its minimum exchange rate (peg) come under threat. So, first NIRP in Europe, then in Japan (as per our overnight discussion) [7], and now the Swiss warning NIRP is coming there next...
As Bloomberg reports,
Negative interest rates remain option for SNB should minimum exchange rate be threatened, says Thomas Moser, an alternate member of SNB policy-setting Governing Board, Wall Street Journal reports.
Says “we’re never shy about it. We always said we would use it if needed”
SNB President Thomas Jordan also said on June 19 that “introduction of negative rates is a possible option:”
It seems the reaction was 3-step 'intervention' - because of course - the SNB needed the market's move to confirm their threat... Sell Gold, Sell JPY, then Sell Swissy...
[8]
We have opined on the linkages between Gold, JPY, and the Swiss Franc peg previously... [9]
and the SNB's actions with JPY here... [10]
and Swiss Yields are now negative to 2018...
[11]
Charts: Bloomberg
