The Swiss National Bank’s (SNB) reported 52 billion euro ($57 billion) loss last week has once again raised questions about the future of the Swiss economy and the continued impacts that a strong currency has had on it.
Given that the SNB abandoned its 1.20 euro peg in January, the 52 billion euro loss was expected, but the franc is still strong, and the loss could, among others, thwart the SNB’s disbursements to Switzerland’s federal and regional governments, which rely on these payments to help balance their budgets. What’s next, then, for Switzerland and the Swiss franc?
Jennifer McKeown, European economist, Capital Economics:
“We expect very sharp falls in Swiss exports in the coming months, given that the exchange rate is still so high and we believe that the Swiss franc is likely to come under renewed pressure for the rest of the year, perhaps in part due to the Greek situation, since a Greek exit from the Eurozone would mean more investors would be looking for safe havens. There is also every chance that the European Central Bank (ECB) will extend its QE program, and more policy support from the ECB will also put upward pressure on the franc. I think it’s likely that the SNB will cut interest rates once more and I don’t think it will be afraid to intervene in the foreign exchange market.”
Vito Sciaraffia, vice president, investment Strategy, Innealta Capital: