In any case, this is a clear statement of intent from the CHF, which is effectively devaluing the currency in full view of the public. Whether the market will allow this to continue in the future is another matter.
And so another one is added to the list of the clever ones in the new The Era of Devaluations. As we said in that article, the counterpart is always the same inflatable doll: the euro. A dirty, well-worn doll that’s been over-inflated. It would be highly advisable to deflate it properly to ease the strain on its peripheral seams, which are already threatening to burst.
The pound sterling has been taking a more low-key (yet highly effective) approach, but Switzerland has made its move loud and clear. Any political retaliation from the EU and/or the US will be minimal, if there is any at all. But such blatant moves provide ammunition to those who have systematically intervened in their currency on political grounds, disregarding market forces. We are referring, of course, to China, which we can hardly accuse vehemently and effectively of something that Switzerland itself is carrying out. Yet another name to add to the list of ‘clever ones’, providing interventionist and protectionist arguments to anyone who needs them to justify economic, political, nationalist and unilateral moves.
And what about the USD? Will it continue to act as a reliable counterpart, or will it return to the list of the clever ones at 1.65 $ per euro? Many would say that the euro cannot hold its own on its own, come what may. Anyone’s wrist would eventually give way….