The Swiss National Bank, EURCHF and Gold: Three entirely different entities, but events in the very near future could mean the three are inextricably linked: A little known…. referendum could dramatically change the away the Central Bank handles its strength of the currency.  Up until last week most financial media commentators hadn’t pick up that on the 3Oth of November a referendum  titled ‘Save Our Swiss Gold’ which if successful, would mean the Swiss National Bank has to hold at least 20% of its assets in Gold, never be able to sell it and entirely stored in Switzerland. Why is this important? The implications of this vote are colossal.  First of all this would radically change how the stability and strength of its currency is handled, secondly, as current assets held in Gold are just 7% it would mean buying at least another 13% and lastly because of the previous measure it would possibly weaken their ability to defend the 1.20 collar level imposed by the SNB back in 2011.  The repercussions of this is could unravel was of the most biased trades in the FX world at present: Long EURCHF: with the collar level set at 1.20, most FX traders have been positioning themselves long for the expected intervention : the last time this happened the currency moved to 1.22.  How will it pan out? It’s extremely difficult to call but I hold the view that until the vote has taken place the SNB will not be intervening in any significant size: meaning its possible we could see a move below 1.20

Jordan Hiscott,
Senior Trader


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