Comments from SNB board member that rates will not be able to stay low indefinitely caught investors by surprise. Lately some positive signs have emerged from Switzerland showing private consumption rose 2.05% and unemployment topped out at 4.5%. In the SNB meeting last week the SNB reiterated it is committed to keep the CHF stable against the Euro to tackle the weak exports and support the Swiss industry. In addition the Central Bank also pointed some signs of economic recovery are emerging signaling Swiss benchmark rates could rise from their record low of 0.25%.Neverthless with the Swiss economic recovery still threatened by the strengthening CHF and inflation figures still within rage investors were betting rate hikes in Switzerland are not imminent. However the comments made yesterday from the SNB member that the market should get used to higher rates in the future spurred bets that higher rates in Switzerland might be closer then previously assessed. Investors reacted rather swiftly to the comments and curbed long Dollar bets against the CHF and crowded heavy bids on EUR/CHF pushing it below 1.44. Click for CHF technical analysis
Rate hikes in Switzerland still look limited
Although the Swiss central bank is keen to show the SNB will not allow any bubbles to take place, folding back emergency measures and now suggesting higher rates, the SNB cannot yet afford a long term tightening move. The Swiss economy is highly dependent on the EU as the EU posses the largest trading partner of Switzerland. Swiss EU trading partners such as Germany are experiencing flat growth and weak job market a continuous tightening move could dent Swiss recovery very rapidly, weighing on Swiss exporters and pushing down consumer spending.
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