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More Posturing Out Of Europe: Franc Surges After SNB's Bluff Is Called, No Peg Announced, "More Of The Same"

Tyler Durden's picture


As Zero Hedge was widely predicting (most recently here), there was no announcement of a fixed or floating peg in the CHF (which was obvious from a mile away: the desperate attempts to leak misinformation to the media and make the franc unattractive were enough to only fool various robots), and instead the SNB's now uber-powerless Philipp Hildebrand said that he "aims to expand banks’ sight deposits at the SNB further, from CHF 120 billion to CHF 200 billion." Translation: "we are terrified to do anything more, we can't afford any more balance sheet losses and for all those who called our bluff, you won" - the immediate result is a 300+ pip tumble in the EURCHF. Elsewhere - pervasive disappointment among the sellsiders who actually bought this theater hook, line and sinker: "SNB seems willing to drag feet for now before pulling trigger on FX spot intervention" Valentin Marinov, strategist at Citigroup, writes in note. Ironically the market is now falling for more of the same as it anticipates something to come out of the Swiss government to also discuss measures against the strength of the CHF. However, as Goldman says (note below) hardly anything will come out of it: "After all it is the SNB who decides on the currency regime and today's announcement is, in our view, a clear signal that the SNB first wants to see how the current measures work before they will decide on any additional measures." Prepare for another 11.5 sigma move in the USDCHF as the "priced in" central bank non-intervention unwinds.

Full Statement from the SNB:

Swiss National Bank intensifies measures against strong Swiss franc


The measures taken thus far by the Swiss National Bank (SNB) against the strength of the Swiss franc are having an impact. Nevertheless, the Swiss franc remains massively overvalued. The SNB has therefore decided to expand again significantly the supply of liquidity to the Swiss franc money market. In so doing, it is increasing the downward pressure on money market interest rates with a view to further weakening the Swiss franc exchange rate. With immediate effect, it aims to expand banks’ sight deposits at the SNB further, from CHF 120 billion to CHF 200 billion. In order to achieve this new target level as quickly as possible, it will continue to repurchase outstanding SNB Bills and to employ foreign exchange swaps. Furthermore, the SNB reiterates that it will, if necessary, take further measures against the strength of the Swiss franc.

And Goldman's take

More of the same


The SNB announced this morning to "intensify" its measures against the strong Swiss franc. Given the "massive overvaluation" of the CHF the SNB will increase its supply of liquidity in order to "increase the downward pressure on money market interest rates". More specifically the SNB aims to increase bank reserves of commercial banks at the SNB by another CHF80 billion. Moreover, the SNB will "if necessary, take further measures against the strength of the Swiss franc".


At least for now the SNB sees no need to revert to other options, such as outright FX interventions, to counter the CHF appreciation. By reducing money market rates the SNB hopes to make holding CHF liquidity less attractive. Moreover, the SNB probably also hopes that some of that additional liquidity will find its way into Euro denominated assets.


The Swiss government will probably have a meeting this afternoon - there is no official confirmation yet - to also discuss measures against the strength of the CHF. While there have been speculations that there may be an announcement of some kind of peg against the Euro, we doubt that any specific steps will be announced today. After all it is the SNB who decides on the currency regime and today's announcement is, in our view, a clear signal that the SNB first wants to see how the current measures work before they will decide on any additional measures.

EURCHF Slide and then kneejerk. Expect the downward move to resume with a vengeance.


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Wed, 08/17/2011 - 07:10 | 1568235 anynonmous
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Schork calling for 120 - 130 oil  among other things cites the gold ratio 15/1

sees gas (cars) bottoming at 3.25 before climbing back to 4 towards year end

Wed, 08/17/2011 - 07:10 | 1568238 Ben Probanke
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this aint CNBC here.

Wed, 08/17/2011 - 07:30 | 1568261 HelluvaEngineer
HelluvaEngineer's picture

Actually it was Bloomberg, but yeah.

Wed, 08/17/2011 - 07:39 | 1568270 Thomas
Thomas's picture

We are doomed--truly doomed--when every central banker in the world is attempting to undermine their own currency. Fools or criminals: heaven only knows.

Wed, 08/17/2011 - 07:10 | 1568237 lolmao500
lolmao500's picture

I want the silver/gold ratio at 30 or lower...where it should be.

Wed, 08/17/2011 - 07:15 | 1568243 Raymond K Hassel
Raymond K Hassel's picture

How will the GNB react to the news? Oh that's right, Gold don't play dat. [thwack]

Wed, 08/17/2011 - 07:13 | 1568244 speconomist
speconomist's picture

Hildebrand... please someone help me get rid of him!

Wed, 08/17/2011 - 08:21 | 1568345 Ratscam
Ratscam's picture

come on, let the brilliant hildebrand, geithner, summer, bernanks, etc. do their work. they,re doing it in the people,s interest. that is why gold prices are at their lowest levels.

Wed, 08/17/2011 - 07:17 | 1568247 PaperBear
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The Swiss legislature should pass that bill before them that authorises an alternative franc that is backed by gold and perhaps silver.

All the funds going into the fiat franc will flood into the gold franc.

Wed, 08/17/2011 - 07:19 | 1568251 jjsilver
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Gold bars, coins sold at 750% premium on buying frenzy in Dubai

Wed, 08/17/2011 - 07:46 | 1568278 Snidley Whipsnae
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We continue toward the point where no amount of fiat will purchase any amount of PMs...

Way to go Ben! Keep it us and soon 10oz of gold will buy that empty $1Million macmansion on the water! WooHoo!

The crash is going to make Weimar and Zimbabwe look like a walk in the park...


Wed, 08/17/2011 - 07:23 | 1568256 speconomist
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WB7, please, we need some artwork of uber-powerless Hildebrand, a.k.a. Eddie Munster.


I would like to get it in a mug or something.

Wed, 08/17/2011 - 07:25 | 1568259 Oh regional Indian
Oh regional Indian's picture

Currency race to the bottom.

Wait till countries like India, who have so much (their entire, recently bloated middle class, probably 2-300 million strong and growing fatter by the day on cheap money and cheap credit) riding on strong dollar/euro/GBP and weak rupee..... any shift is SHTF. They are all trying furiously now to serve the local market, but no go.

Of course, rate decisions in India happen via the red-phone to the BIS, but still, the rupee has a long way to fall to hit anywehre near it's real "value", which ironically, would have been really strong if the economy had remained largely agrarian (yep, food crisis will make a whole new set of millionaires and billionaires)..... but the farming sector has been gutted. 

Dollar/Yen/Euro et. al. look like they are all perched on top of a very greasy pole right now. When the real slide begins, I shudder to think of global consequences. Coming soon too, clearly.


Wed, 08/17/2011 - 07:32 | 1568265 speconomist
speconomist's picture

Keynesian politicians and central bankers in India too?

How much are they wasting keeping the ruppe devalued per year?

I am trying to wonder how much would the Indian people prosper with a stronger currecy cheapening their imports, higher real wages, more purchasing power of savings, etc.

Wed, 08/17/2011 - 07:40 | 1568272 Oh regional Indian
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Spec, India is still a commonwealth nation. Still a brit colony, thinly disguised as the world's largest demoncrazy. 

Yes, deficit finance and asset bubbles are very much the name of the game here as well.

If only the establishment had the real interest of Indian people (I suppose you can say that for any nation in the world) at heart, eh? Nope, we are all in the same boat and India is probably in the crosshairs for some serious population reduction, I imagine.


Wed, 08/17/2011 - 07:58 | 1568295 speconomist
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Do you mind if I ask you how do you track when someone answers your posts? Haven't found a good way, I was lucky that I refreshed the tab to see if you had answered.

Also, thanks for the info.

Wed, 08/17/2011 - 08:00 | 1568299 Oh regional Indian
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Not sure Spec. I just refresh every so often on pages where a conversdation looked promising. in fact, I don't think ZH has that feature, yet.

And you are welcome.


Wed, 08/17/2011 - 07:31 | 1568262 unununium
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Apparently the Swiss and Japanese can't fight the Fed, either.  Major AmeroAnglo victories being scored in the ugliest dog / best deck chair arrangement / best looking horse in the glue factory contest.

Wed, 08/17/2011 - 07:31 | 1568263 Cdad
Cdad's picture

Hey, look everyone...the criminal syndicate known as Wall Street is beating the crap out of the US dollar again this morning.  Isn't that great?  Yeah...nothing says "investment" like currency debasement.  Probably Goldman continuing to price in a QE3 that is not coming.  Thanks Goldman Sachs.

And here...folks were just about to get a break on the price of gasoline.  Oh well, too bad sheeple.  Sorry middle class.  No lower food prices for you this year.  The people at Goldman Sachs need to make their million dollar bonuses, so your currency has to be butchered, day in and day out.  Yep, just has to be this way.

Sorry Average buying power for you.

Wed, 08/17/2011 - 07:49 | 1568281 HelluvaEngineer
HelluvaEngineer's picture

But just look, Cdad.  CNBC says that futures, while previously even, are now climbing!  This is obviously great for America. 

...and as usual they have no friggin clue why it's happening.

Wed, 08/17/2011 - 09:22 | 1568574 Cdad
Cdad's picture

It is a crime wave like never seen before, brother Engineer.  When this all breaks, and there is no one left in the market, maybe then the BlowHorn [CNBC] crew will have a meeting to discuss their absolutely nonexistent match their ever shrinking audience.


Wed, 08/17/2011 - 08:55 | 1568452 Ricky Bobby
Ricky Bobby's picture

+1 Great post as usual!

Wed, 08/17/2011 - 07:42 | 1568276 sudzee
sudzee's picture

Millions of fx accounts, at huge leverage, trading a trillion a day leaves gov'ts powerless to effect political will. Everybody in a race to the bottom to save their economies but it's just a bog circle jerk. Fiat has become the best joke dejour. Although countries try as they may, truth be, that although they can print fiat they can't print GDP to save their political lives. Government is suppossed to be a derivitve of the will of its people not the other way around. We really need a financial reset soon and thousands of well used public gallows for all political parisites.

Wed, 08/17/2011 - 08:34 | 1568363 falak pema
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The Euro zone farce is now reaching fever pitch. This whole game of EU was a political construct to bring Germany under control of its partners with an economic Euro zone shell to please them at minimal cost for abandoning their sacred DM and giving the rest of europe their benign economic/financial umbrella. 

Now that the shit has hit the sovereign fans based on private banker greed having sucked EU zone into US led ponzi, and Political cowardice on both sides of the pond since december 2008, letting this cancer grow, we are back to the POLITICAL drawing board to recharter at the 11th hour the new economic/financial course of a floundering EU.

Plan A : Tighten the political cooperation through measures taken in 2012-2013 period to make the deal federal. As there is NO federal fiscal, financial mechanism capable of resisting to the upcoming sovereign bond meltdown. Unless the Euro bond emerges. This can ONLY occur if the political instruments are in place to define and have VOTED fundamental changes to the treaty in each major EU nation. This will take time and will be fueled by the ongoing crisis. So EU is at the cross roads. Either we go federal and have the political ambtion to do it, or its  Plan B.

Plan B : Back to nation state economies. Or to two sub zone economies, North and South Europe. This Plan B is the death of European geo-political power for fifty years. So the people of Europe have to choose if they want to be collectively a BIG player on the global scene thirty years down the road. Or, if they are content to be a Swiss type gruyere cheese selling bunch of nations, each living in its own 'confy' zone, hoping there is no Atilla the Hun down the road. Tall order, as now the rest of the world is coming out of its 'inferiority complex' relative to the Western world. The age of Enlightenment is over for Europe. As for the US of A.

Wed, 08/17/2011 - 09:06 | 1568497 valuetrader
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My comment on the CHF is that actually the SNB can achieve something. They've done it before when they put negative rates in place - very negative too and crushed the franc many years ago. The SNB has the ability to push the FX fwd market into deeply negative yields (for people who trade fx) which means that speculators will have very negative interest rates on their CHF long positions (I think even -10% is possible if the SNB wants to). This is why they can move the market. I don't know to what extent this CHF appreciation is due to leveraged players and to what extent it is the result of people converting savings into CHF but I suspect there is a lot of leveraged players and the SNB can really push them very hard and cause losses. I wouldn't buy CHF now. This is just an opinion.

Wed, 08/17/2011 - 11:29 | 1568941 Downtoolong
Downtoolong's picture

"More Of The Same"

= More of the Shame
