EURCHF to parity?

Via Bloomberg

Via Bloomberg  
The options market is pricing in the possibility of EURCHF below parity in 12 months time. The strength of the CHF is a constant concern for the Swiss National Bank keen to defend its export market.
 SNB, EURCHF floor, 1.200
The options pricing chimes with Thomas Jordan’s recent comments that the SNB are making a ‘substantial commitment regarding FX intervention and that they might cut interest rates further. Furthermore, sight deposits for the period ending May 8 showed a big increase.
Now, Thomas Jordan has said that the SNB is not thinking of imposing a new minimum exchange rate. Remember Jan 2015 and what a disaster that was when the SNB gave up defending the EURCHF peg?  However, don’t rule out a new minimum exchange rate for EURCHF indefinitely.
Here are some things to look out for that could prompt the SNB to act:
  • the pace of currency appreciation in the spot market
  • the franc’s real effective exchange rate
  • the depth of deflation in the nation (-0.3% is already factored in for 2020 in its bulletin)
  • the strength of inflows into the nations assets
One key think to remember, if the SNB do act, or do put in a new minimum level. just don’t over leverage. Remember, there are old traders and there are bold traders. However, there are no old, bold traders.