The conservative Swiss guarantors of financial stability would prefer to avoid a repeat of the turmoil they suffered on January 15 this year. On that Thursday, the Swiss franc shot up 30 percent against the dollar and the euro after Switzerland’s central bank bowed to market pressure and abandoned a three-year cap of 1.20 francs to the euro as investors fleeing the euro crisis piled into the rock-hard currency of the wealthy Alpine state.
A strong franc is poison for Switzerland’s export-heavy economy. Thomas Jordan, governor of the Swiss National Bank, the SNB, isn’t to be envied.
His central bank is wedged between the European Central Bank and the U.S. Federal Reserve, whose monetary policies have a huge impact on Switzerland.
Even the timing of of the SNB’s next policy meeting on Thursday is difficult. It comes one week after the ECB cut its deposit rate and extended its monthly asset buys by six months, and six days before the next meeting of the Fed, which is widely expected to go the opposite way and start raising interest rates.