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The Swiss National Bank made a an erratic move to remove it's price cap for the Euro, which saw the franc go up as high 30% with respect to the Euro since the removal of the cap. This article very well explains the economics of such a removal and the parties affected. As the franc grew strong, foreign products are much cheaper for holders of Swiss francs however this situation is complicated for swiss exporters since their products will be too expensive for foreigners. Importing Swiss products will be very expensive now. Swiss watchmaker Swatch's share has fallen 15% since the removal of the cap, and money other swiss companies will also suffer. Currency broker Alpari also suffered losses after the remover of the cap. But, having said that, the Euro did recover a bit as it went from buying 1.20 francs to 0.8052 francs, and then went up to buy 1.04 francs.
The Swiss National Bank made a an erratic move to remove it's price cap for the Euro, which saw the franc go up as high 30% with respect to the Euro since the removal of the cap. This article very well explains the economics of such a removal and the parties affected. As the franc grew strong, foreign products are much cheaper for holders of Swiss francs however this situation is complicated for swiss exporters since their products will be too expensive for foreigners. Importing Swiss products will be very expensive now. Swiss watchmaker Swatch's share has fallen 15% since the removal of the cap, and money other swiss companies will also suffer. Currency broker Alpari also suffered losses after the remover of the cap. But, having said that, the Euro did recover a bit as it went from buying 1.20 francs to 0.8052 francs, and then went up to buy 1.04 francs.
4 comments:
Switzerland already experienced deflation in the latter parts of 2014. The removal of the cap should perpetuate deflation. This immediate shock to the import/export market will be interesting to follow. I will be watching the impact on Swiss GDP. Subsequently, I want to follow the unemployment figures. Do you think Switzerland will experience a shock in its labor market? I find the timing intriguing due to the increase in the value of the dollar in the marketplace.
The removal of the currency ceiling against the euro has not been favorable for Central and Eastern Europeans. During the price ceiling, the Poles were encouraged to take out mortgages in Swiss franc because the interest rate was lower than Polish zloty and there was an expectation that the zloty would appreciate. However, now the Swiss franc has appreciated against the zloty and so the monthly mortgage payments have hiked.
I think it will be a slower change in the labor market. If there is a shock, I feel like the effects will be slower to be felt. But I think that this is a good thing for the Swiss Franc as it should make the currency a little stronger and less under to sway of the weakening Euro.
This is fun (from an American perspective), as it means our dollar is also improving compared to the Euro, and as a whole could be a good thing for the Swiss/Swiss Franc longterm even if it is bad for individuals at the moment. I would have to agree with Emi about this being best for the Swiss Franc more than anything or anyone else.
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