Some extracts from ForexLive.com
Says Thomas Jordan.
- Need to wait to assess impact of ECB rate cut
- Wasn’t totally surprised by the cut
- Interest rates will remain low in Switzerland
- Low rates may lead to property bubble risk which SNB will respond to if necessary
- SNB monitoring property market which is already in difficult situation
I did wonder about the lack of movement in EUR/CHF yesterday considering that nearly every other euro pair took a hit. It’s either become the forgotten currency or there’s some sneaky SNB support that comes in on risk events.
About EUR/NOK and EUR/CHF
For the ones do not understand the diverting movements of NOK and CHF.
The ECB rate cut means that ECB economists expected inflation to continue to be low for a prolonged time.
NOK is a risk-on currency that profits on higher rates. Prolonged low inflation in Europe risks a rate cut for NOK, too.
American money market funds often invest in higher yielding currencies like NZD, AUD or NOK.
At the same time US GDP data was good and stock markets weakened. Hence markets anticipated that US investors moved out of the risk-on currency NOK into USD.
EUR/CHF was lower because there is no risk of a SNB rate cut, they are at 0%. Swiss investors might now move out of EUR positions, consequently CHF was stronger. Investments in CHF are far more driven by rich Swiss investors than by American ones, while NOK, AUD and NZD are influenced far more by US investors that seek high yields.
As long has inflation in Europe goes down, NOK may remain oversold.
Hence, in order to make the EUR/CHF fly you must convince Swiss investors to buy European stocks or MM funds
Have fun with it, the Swiss investors are quite proud with their economy and negative to the euro zone.
Tags: money-market funds,Norwegian Krone,Swiss National Bank