Does The Swiss National Bank Forecast The End Of The Euro Currency?

Jan. 20, 2015 6:28 AM ETFXF, FXE8 Comments
AtonRa Partners profile picture
AtonRa Partners


  • In our view, the Swiss National Bank's decision to abandon the Euro/Swiss franc floor of 1.20 does not make any sense.
  • Unless the SNB expects something material to happen next week.
  • Could a return to national currencies in Europe be in the cards?

What's behind the Swiss National Bank decision?

Last week, the U-turn in the Swiss National Bank's monetary policy raised many questions. Notably is there something bigger afoot that might be totally unexpected by the markets?

Only three days after the SNB's vice-chairman, Jean-Pierre Danthine said the cap would remain the cornerstone of its monetary policy (while its president, Mr. Thomas Jordan, described the cap as "absolutely central" last month), the decision to abandon the Euro/Swiss franc floor of 1.2000, introduced on September 6, 2011, has no tangible explanations in our view.

We find it hard to accept the explanation that the decision was triggered by the upcoming European Central Bank massive bond-buying program that could have forced the SNB to massively sell Swiss francs for Euros to defend the cap, as the January 22 ECB decision does not make any doubt and as Mr. Draghi has been very vocal in the past few months about bringing the balance sheet of the ECB back to the levels of early 2012 (Euro 3 trillion).

We also find it hard to believe the SNB has more hints than anyone else in the market on what would have been the possible market reaction to the upcoming ECB announcement.

Finally we disagree with some comments that the size of the SNB's balance sheet was getting out of control as, at the end of 2014, the number stood at CHF 522 billion vs. CHF 490 billion at the end of 2013. There wasn't any sharp increase in the last few months, which could have triggered action.

Financial markets adjust to expectations, and expectations have been adjusted since June of last year (the Euro depreciated vs. the US dollar some 16%) when the ECB decided to suspend the weekly fine-tuning operation sterilizing the liquidity injected under the Securities Markets Program. If the

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AtonRa Partners profile picture
AtonRâ Partners is an asset management company, founded in 2004 with head office in Geneva, incorporated under Swiss law, duly approved by the Swiss Financial Market Supervisory Authority (FINMA) under the Swiss Collective Investment Schemes Act. AtonRâ Partners is a conviction-driven asset manager combining industrial and scientific research with financial analysis. AtonRâ Partners focuses on long-term trends powerful enough to be turned into thematic equity portfolios.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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