fundamental analysis FX
impos s ible and not of g reat use. -
Globa l g rowth wi l l play
a mas s ive role in the end g ame. Br ing ing debt under control through aus teri t y measures ( independent ly ‘g rowing out of problems’ i s a luxur y of countr ies that can deva lue and have an independent monetar y pol ic y) avoiding a def lat ion/depres s ion scenario to ke ep socia l cohes ion at a sus ta inable level , wi l l larg ely depend on the g loba l macro picture of the next few year s . Enough of the Eurozone sag a for now… but s tay tuned. We are l iving interes t ing t imes . Let ’s cont inue thi s ar t icle anyway wi thout Europe :
leaving there are two
spe ci f ic s i tuat ions in FX which are de eply inf luenced by the s ing le currenc y s tor y.
Chart 2. Impressive escalation in SNB reserves M
eet the new Deutsche Mark
Or the Swi s s Franc , as i t i s more commonly known.
Chart 1. Eur/Chf – diminishing effectiveness of the SNB intervention
Swi tzerland came out f rom the big credi t cr i ses of 2008 and 2009 in pret t y bad shape as mos t Wes tern e conomies . Maybe, a bi t bet ter f rom a rea l e conomy s tandpoint (non- c ycl ica l se ctor as pharma or food) but s trong ly biased on the bat tered f inancia l se ctor. Wi th shor t term rates a l ready s lashed to near zero level s , the Swi s s Nat iona l Bank de cided to fol low the Quant i tat ive Eas ing path taken f rom the Federa l Reser ve and the Bank of Eng land. The domes t ic bond market , even put t ing tog ether government and corporate market s , was too sma l l to have a s igni f icant impact wi th bond purchases . So the SNB de cided that uns ter i l ized purchases of Eur/Chf would have ser ved the cause (and helped the expor t se ctor at the same t ime) .
FX TRADER MAGAZINE July - September 2010 21
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