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A.steve

Swiss Central Bank...

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Allegedly, this is kind-of unexpected... They say that they will buy an unlimited amount of Euro bonds to prevent the Swiss Franc from appreciating above 1.20...

I wonder, is this just a ploy to get sovereign debt off the books of the ECB? Are these unlimited purchases likely to be on a scale that affects the Eurozone debt crisis? Is it a bluff?

http://uk.reuters.com/article/2011/09/06/markets-global-idUKL5E7K616120110906

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Allegedly, this is kind-of unexpected... They say that they will buy an unlimited amount of Euro bonds to prevent the Swiss Franc from appreciating above 1.20...

I wonder, is this just a ploy to get sovereign debt off the books of the ECB? Are these unlimited purchases likely to be on a scale that affects the Eurozone debt crisis? Is it a bluff?

http://uk.reuters.com/article/2011/09/06/markets-global-idUKL5E7K616120110906

I live in Switzerland, for some export-oriented firms the strength of the Swiss Franc is devistating. Anyway the intervention is having a short-term effect at least, I doubt if it can last though.

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I live in Switzerland, for some export-oriented firms the strength of the Swiss Franc is devistating. Anyway the intervention is having a short-term effect at least, I doubt if it can last though.

The reason for concern is sensible... it's only the decision for a central bank to buck the market trend that I doubt... history suggests that such interventions almost always fail... and end in a disaster bigger than the one they aimed to avert.

Edited by A.steve

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The reason for concern is sensible... it's only the decision for a central bank to buck the market trend that I doubt... history suggests that such interventions almost always fail... and end in a disaster bigger than the one they aimed to avert.

A.K.A Soros v BOE.

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A.K.A Soros v BOE.

That's one example, only... this time, it really is 'different'.

One difference is that the BOE were trying to strengthen Sterling (as our interest rates were low and our inflation high compared to Germany) while the SCB are trying to weaken the CHF because international investors 'irrationally' (according to the SCB) want CHF.

If (as appears to be the case) the demand for CHF is not driven by observable exports, it would probably be safe to assume that it is down payments of debt that are driving demand for CHF. If so, it's not much of a stretch to imagine this being evidence that the (often assumed large) CHF carry trade is unwinding... possibly because it can be more profitably financed by carrying USD... that can be borrowed more cheaply - and where the currency's value is likely less volatile - hence reducing longer-term risks. If the size of the switch of carry from CHF to USD is large, it may prove interesting that the SCB is only defending the Euro exchange rate.

Edited by A.steve

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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