Steen Jakobsen, Chief Economist Saxo Bank is buying in our arguments

Steen Jakobsen sees 25% percent chance that the floor breaks and if it does it breaks to parity.

Last week Thomas Jordan removed any hopes on a hike of the EUR/CHF and invited smart money and hedge funds to a no-risk, high return game on the Swiss franc, which these gratefully accepted. After Morgan Stanley has reiterated their February stance that the floor will break, now Steen Jakobson, Chief Economist, Saxo Bank, gives his opinion in the tradingfloor.com.  He increased the likely-hood of a floor break from less than 10% to 25%. If this break happens, then the EUR/CHF would tank to parity. His main arguments seem to be a short version of our latest description of the political discussions about the floor in Switzerland. 1. The strong Swiss Q1/2012 and Q4/2011 GDP , see above. "Swiss based economists expect inflation to reach +1.0% by August/September due to like-for-like comparison level change."  Our reference here. 2 … "Capital flooded into Switzerland again after the Greek election in May, making May 2012 the biggest intervention month in history. If this flow continues for much longer – SNB intervention will reach 100% of GDP soon." Our reference here. 3. "The potential surprise element of a move to a higher floor has been removed by our first point above – higher growth and positive inflation." Our reference here. 4. "There is now domestic talk in Switzerland circulating that a EURCHF level of 1.000 is actually fair, and political focus on the EURCHF floor is increasing. " Our reference of a 0.93 EUR/CHF of UBS here. 5.       "Switzerland is coping well with its strong currency. Don’t forget that with a strong currency, you can always buy your competitor if you can’t compete, and furthermore due to the big corporate structure most of Swiss company earnings are in US Dollars, Euros and Yuan rather than in CHF. " See Here After talking about capital controls (here his good reference) he states: "We still see a 75% chance of this not happening, but the price of being wrong (the 25% possibility that virtually no market might exist in a 1.20 to 1.00 gap episode) is far too big to risk in my opinion." Here also a Dukascopy interview with Steen. Full story here Are you the author? Previous post See more for 1.) CHF Next post
Tags: Capital Controls,floor,franc,Jordan,Swiss National Bank,Switzerland