SNB's Jordan Seems Cautiously Optimistic

The SNB's Jordan has been quoted on the news wires today. He seems content with current Swiss franc exchange rates. He claims as have other Swiss officials that the intervention has been to prevent currency appreciation, which may remind one of the guy in the city who sells whistles that purport to keep elephants away. When a boy informs the salesman that there were no elephants in the city, the sales guys says, "see how good it works."

Outside of the currency, Jordan noted that the Swiss economy was being helped by foreign demand and expects that the Swiss recovery lags behind others, partly because it entered the recession later. He expects positive GDP from mid-2010, with the jobless rate rising until 2011. He seems to downplay the deflationary risks, which as ostensibly the reason for the Swiss franc sales and foreign bond purchases. He does say, however, that the SNB remains active in buying bonds to prevent risk premiums from rising. While it is too early, he says, to implement an exit strategy. He identifies the time of the exit strategy to be signalled by inflation forecasts rising about the target for price stability. The Bloomberg consensus expects negative year-over-year CPI readings though the end of this year and average 0.65% in H1 2010.

The euro has pulled back from the CHF1.5220, but look for the CHF1.5180 are to provide a new low risk opportunity to buy euro-Swiss.

On Aug 20, Switzerland reports its July trade figures. Exports were off 2.6% in June (month-over-month). If Jordan's hint is god, it suggests exports recovered (or contracted less). ZEW Aug survey is out and with a 16% rally Swiss share prices since mid-July, it would not be much of a surprise if the ZEW increased from its flat reading on expectations in July.