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play with the time-window slider
http://www.xe.com/currencycharts/?from=EUR&to=CHF
Damn. Their central bank threw in the towel. More than likely shades of things to come in the EU.
Totally ed their economy overnight.
play with the time-window slider
http://www.xe.com/currencycharts/?from=EUR&to=CHF
The cheese is great...
BTW, they're not EU members, IIRC...
No, but the first country to throw in the towel and admit their central bank couldn't do QE forever. They had been supporting the franc and finally realized it was hopeless. Same thing could happen to the EU with all their weak sisters teetering on bankruptcy.
... as if global finance weren't deeply interconnected.
This isn't QE (central bank lending, selling bonds at extremely low rate to pump up liquidity) at all. It's foreign exchange intervention to peg one currency to another.
lol you don't even know what QE is, QE is when the central bank buys up bonds pushing down interest rates. you have a lot of opinions about this for someone who is ass backwards and could benefit from an entry level economics course.
Whether you print money to but other currencies to support yours or you print money to buy up bonds it is still a form of QE. The central bank is intentionally creating new money to manipulate the markets one way or another. The key here is the Swiss were the first ones to throw in the towel and admit they couldn't do it.
What does QE has to do with this? What they've thrown the towel on is pegging the Swiss Franc to the Euro to make commerce with the EU more compe ive. They're not a member of the EU, so I'm not sure what do you mean about "same thing could happen to the EU"...
Pegging currency is hardly new, and it eventually failing isn't new either. Eventually the disparity in inflation on both economies makes it unsustainable (see ARG pegging the peso on the dollar in the 90s).
That's why becoming a full member of the EU includes replacing the currency (or in the case of Ecuador, switching their entire currency to the US Dollar). That's the only way to deal with this stuff long term. But Switzerland opted not to become a full member, so they're just going to have to deal with this.
Lol if you just think this affects the Swiss. Are you saying the euro value isn't at risk? The whole reason the currency's were unbalanced was a flight to perceived safety of the franc vs the euro.
That's not entirely correct. Switzerland has to obtain Euros to do commerce with the EU bloc, which means they have to obtain currency that's not theirs. That's when you get inflationary pressure (due to printing to obtain a different currency).
QE had nothing to do with that. Under QE, bonds were still paid and traded in US dollars. There's no currency exchange in that scenario.
It's not different than investors flying to the dollar on the same concerns. Currency traders will always flock towards currencies with less inflationary pressure.
Couple that with EU QE next week of between 500 billion and one trillion and the political difficulty of deciding what bonds and how much to buy between 15 EU members, throw in the Greek bankruptcy and upcoming elections and anti austerity sentiment and it is going to be really difficult to support the euro.
Difficult for who? The EU is not going anywhere...
El noon I understand that the position if the US fed / federal reserve and the EU is different but there are also similarities in creating new money out of vapor.
You really think the northern tier of the EU will be politically able to support the southern tier forever?
Btw I think the free trade EU will survive, I'm just not as confident as you are on the common currency surviving.
Creating new money is a concern if you already have inflation... but what the EU is fighting right now is deflation. Last year, they posted mostly negative inflation almost throughout, peaking at -1.1 in June (2nd worst since Oct 2009).
It's not surprising they're trying to use the same methods the US used.
European Central Bank inflation numbers:
https://www.ecb.europa.eu/stats/pric...lation.en.html
For the most part, none of the countries mostly affected by the economic downturn in the EU has expressed any intentions of leaving the union. 'forever' is a big word. I don't know I would use it with anything. But there's no indication the EU will change in the foreseeable future.
Currency traders will do what's best for their money. If they get word that the EU will devalue to try to get out of deflation, it makes sense they'll flock somewhere else.
Of note is that Swizerland is also on a deflationary state right now. It will be interesting to see what measures they take (if any) now that they're not pegged to the Euro to get their economy going.
http://www.bloombergview.com/article...global-economyIn an accompanying move, the Swiss central bank will now charge banks 0.75 percent for the privilege of depositing money with it. In the bond market, investors in Swiss government bonds are getting negative yields on any securities with maturities of nine years or less; at one point this morning, your reward for lending to Switzerland for a decade dropped to 0.033 percent, or so close to zero that it really makes no difference.
In the past five years, Swiss consumer prices have dropped by an average of 0.1 percent; the most recent figures showed annual inflation dropped by 0.3 percent in December. It's clear from the central bank's comments that it sees a worsening global deflationary backdrop; keeping its currency weaker hasn't produced the higher prices suggested by economic theory.
For the rest of the world, today's move confirms that deflation is a clear and present threat to the global economy. Central bankers everywhere should be re-reading Ben Bernanke's November 2002 speech "Deflation: Making Sure `It' Doesn't Happen Here" -- and reviewing their policies to make sure they're doing everything they can to boost growth and make consumers and companies more confident about their economic futures.
There are a handful of other immediate losers from the move. Any trader who was short the Swiss franc this morning is probably still in a state of shock; Forex.com, a currency trading website, suspended trading in the Swiss currency after the central bank announcement. Staffers at the Swiss central bank's Singapore branch, which opened in the middle of 2013 to replace the currency-defending night shift in Zurich, will probably be relocating.
Less certain are the implications for lenders including OTP Bank, Hungary's largest lender, Vienna-based Erste Group Bank, and Italy's Unicredit, who lent about $14 billion to Hungarians in foreign-currency mortgages prior to the financial crisis, the bulk of them denominated in Swiss francs. A November law obliges banks to convert those loans into forints, and the Hungarian central bank arranged a foreign-currency transfer at that time to cover those conversion needs. The law obliges banks to switch at about 257 forints per franc; today's whipsaw puts that exchange rate at 310, meaning any bank that left itself exposed is facing a huge loss.
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