The Swiss National Bank’s governing council has today been deliberating on what to do to protect Switzerland from events in the eurozone.
Since September, the SNB has capped the franc’s gains against the euro at Sfr1.20 after a massive currency appreciation raised the chances of deflation and a recession in the Swiss economy.
Until recently the floor held without too much bother. But in the past month or so the SNB has been forced to up its game, spending tens of billions of francs in May buying euros. If the SNB losses its nerve and speculators force the franc below the floor, then the interventions could lead to substantial losses, potentially resulting in more political pressure for the central bank.
We will find out at around 8.30am London time tomorrow what the governing council decides to do. But these are the main options open to them. Read more