A Forex View From Afar

A Trader's Look At A Trader's Life

Forex Analysis

Not All of Them Cut

Written by A Forex View From Afar on Thursday, October 09, 2008

After the major central banks decided to cut the overnight interest rate by 50 basis points, we find out today that one of them was not so successful in achieving its objective.

The Swiss National Bank failed today in achieving the intended policy rate of 2.5%. The Swiss central bank, unlike other, tries to influence the Libor rate to control the country’s monetary policy. The logic behind it is that the population/companies/financial institutions access loans at the Libor rate, and by controlling that the SNB has direct control over monetary supply and demands.

However, the Libor rate is a little off these days, simply because banks are not lending to each other right now. As a consequence the 3-month Libor rate increased the SNB targeted rate, and things went higher instead of lower.

The 3-month Libor was fixed at 3.087%, way above the SNB’s target of 2.50%. It is very likely now that in the following days the SNB will flood the market with 3-months repos, in order to drag the Libor rate down. The direct effect of this action will be a cheaper Swiss Franc, which would mean the Usd/Chf is likely to be heading higher.

The same monetary policy the SNB tried to implement has proven to be very useful over the past few years. With the Confidence Crisis now embedded into the financial mind-set the SNB may have their work cut out over the next few days to scramble things together, and in the mean-time we will keep an eye on the swissy moves.

Related Posts by Categories

  1. 0 comments: Responses to “ Not All of Them Cut ”

TheLFB Team & The View From Afar Blog

© 2008 A Forex View From a far Trading Blog

Trade Desk View

Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

Want to subscribe?

Subscribe in a reader.