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Old 17.01.2015, 13:19
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Re: Aftermath of SNB EUR Peg Discontinuation - Would you be happy to take a 20% pay c

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I find it especially difficult to make sense of the record in 2011, which was about 20% above the previous one, based on the claim that the exchange rate is basically the sole deciding factor, as the Euro had been below 1.30CHF (i.e. down by 20% and more from previous year) basically all year.
What was the delta change of imports in 2011? If negative then obviously CH imported less, if flat then the exporters exported more. The appreciation of the CHF obviously hurts exporters, so the fact the trade surplus was +20% YOY is not due to the currency appreciation but probably due to the exporters re-adjusting, cutting costs and becoming more efficient and still remaining competitive in an environment where prices were going up left right and centre due to QE.

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The trade balance surplus didn't increase much afterwards, but increase it did, so even 1.20 obviously wasn't bad at all for the exporters. This makes the outrage from people such as Hayek look rather dubious (..fool me twice..).
Now assuming that the exporters are as efficient as they can be and with their margins squeezed down to the minimum they can be. If the central bank decides that the goods they sell to the world are worth 20% less in the local currency then it's basically economic suicide.

So the trade balance surplus might have been significantly more than previous years in 2011 but that's not because the currency appreciated but because the SNB struck a good balance by introducing the 1.2 cap so the currency didn't appreciate too much to completely debilitate the exporters.

What they completely screwed up is their cap exit strategy or lack of it. By abandoning the cap now and reducing deposit rates to -0.75% they are hoping that this will just sort itself out and settle somewhere where it doesn't hurt the exporters and the economy too much. Their hands were tied though as the ECB looks poised to "pump the jam" even more next week. (parden the terrible pun)

The SNB haven't ruled out further intervention in the currency market though so all options remain open as they obviously don't want the economy to be affected. However it is unlikely that any future intervention will be in the form of any further caps.

As another day passes on this alpine country... People are constantly asking themselves this; When will the local retailers adjust their prices? When will my filling up costs fall by 20%? Will they ever? Should I just cross the border and get what I need where it's cheaper?
And before you know it sales figures are falling and retailers are having to discount their prices to entice their customers to shop locally. They have no other choice.
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