Swiss watch and bide their time
I was going to write that the SNB had moved its EUR/CHF barricade over the last couple of weeks from 1.4315 to 1.4000. But with Wednesday’s move back up to 1.4300, it is difficult to tell what level the Swiss are watching. Perhaps that’s the point.
Ray Farris at Credit Suisse released a new note on Wednesday morning, before the SNB’s fun and games, revising the bank’s three-month EUR/CHF target down to 1.3700. At the time the level didn’t look that ambitious but Credit Suisse’s analysis is largely based on an expectation that the SNB will allow the monetary conditions index to edge back to the year’s high. CS believes that the Swiss will only actually raise rates when the ECB does so, which looks some way off. The note admits: “The main risk we see is that strength in the Swiss economy and particularly its property market force the SNB to hike rates ahead of the ECB and allow a stronger CHF than we are currently forecasting.”
Soggy Zloty
Meanwhile, flooding continues in southern Poland. The blighted area is responsible for around 30% of GDP – which might explain some of the weakness of the PLN against the not-exactly-rampant EUR. However, even with the predicted knock to GDP of –0.8%, Poland, the only European economy that did not go into recession, should still see GDP growth approaching 2% for 2010.
Another point of view might argue that PLN weakness is more down to Poland’s continued insistence on adopting the EUR: this week, Poland’s finance minister Jacek Rostowski reaffirmed the country’s commitment to move to the single currency, although not until 2014 or 2016. Before the credit crisis, the intended date for joining the eurozone was 2012.
Poland’s continued enthusiasm for the single currency, despite its difficulties, is possibly related the fact that Poland is top of the league in handouts from the EU’s structural and cohesion funds.
China Crisis
Paul Day at Market Securities seems to get it right much more often than is fair.
On Tuesday he looked at the Shanghai Composite Index; we don’t usually cover equities in this column but, if Day is right, we’re looking at a big risk-off move in FX (although with a five big-figure sell-off in AUD/USD since Wednesday, not to mention GBP/JPY now a mere 10 big figures away from the all-time low, who’s to say it hasn’t started already?) .
“The weekly chart shows a critical TD Propulsion level at 2363. A move below here may open the floodgates to something rather dramatic – with a downside target then set at 1248. You might want top buy a first test of 2363, but a confirmed break there looks extremely bearish, with little in the way of longer-term trend exhaustion signals being apparent.”
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