Is This The Real Reason The SNB Cut The Swiss Franc’s Euro Peg?

But first, two observations:   1)  Obama supporters must be completely horrified by the number of blatant lies that spewed forth from Obama’s lips as he read his teleprompter to us.  It was better than the usual bedtime fairytales we get from him….2)  I am dead-right about the housing market:  LINK.  Of course, Zerohedge is finally catching up to me on high-end housing.  But I’ve said all along that the collapse of the housing bubble encore would start at the high end…

From the moment I saw the news about the Swiss cutting its currency loose from its tie to the euro, I was interested in the fact that the SNB apparently acted without telling other Central Banks or the usual cast of Too Big To Fail “insider” banks.  If they had, we likely would not have seen a 30% move, as the information would have found some leaks and the swissy would have partially priced in the event by moving somewhat higher ahead of the fact.

I thus had suspected a motive that would later become apparent.  A lot of analysts opined that the move was made ahead of a large QE announcement from the ECB.  While that aspect was no doubt a component of the decision, this news hit the tape this morning:

China, Switzerland to announce offshore yuan trading center in Zurich 

As China takes it currency global, Zurich is set to become a center for yuan trading in Europe with Chinese and Swiss officials poised to sign a financial deal on Wednesday.

“A memorandum of understanding will be signed between the central banks of the two countries during Chinese Premier Li Keqiang’s visit to Switzerland. It is an important step in the internationalization of the RMB, especially in Europe,” a government official was quoted by Chinese news agency Xinhua.

Switzerland is basing its push for the offshore yuan business on the country’s close ties with China, one of the nation’s biggest trading partner. Switzerland is the first country among the world’s top 20 to have a free trade agreement with China…LINK

It’s not just a mere coincidence that the SNB de-pegs the swissy last Thursday and this yuan currency trading deal is announced 6 days later.  The timing is not an accident.

I believe China agreed to set up a European yuan trading center in Zurich on the condition that the SNB sever the swissy’s connection to the euro.   I also think it’s another way for China to indirectly lob a bomb at the U.S. dollar in the ongoing currency war.

15 thoughts on “Is This The Real Reason The SNB Cut The Swiss Franc’s Euro Peg?

  1. Your point #1 about faithful Obama supporters – I have come to realize that these people live in an illusion and nothing will sway their beliefs. There is a great need for progressives to see the man as their salvation, as part of a coming of age for their shining America that produced a black man for president. These are good people, maybe a bit too socialist, but are completely snowed under by their hopes and dreams. Some are friends of mine, and it pains me to see how defensive they are about their attachment to him. I fear for these people when the curtain comes down.

  2. http://www.economicpolicyjournal.com/2015/01/wow-swiss-and-chinese-central-banks-cut.html
    Excerpts:
    WOW Swiss and Chinese Central Banks Cut Deal for Chinese Currency Clearing (A Serious Poke at the Dollar?) By Robert Wenzel

    Switzerland’s central bank said today in a statement that it had agreed with the People’s Bank of China to establish clearing arrangements in Switzerland for renminbi trading and extend a pilot scheme for clients of Swiss banks.

    “It will promote the use of the renminbi by enterprises and financial institutions in cross-border transactions, and promote facilitation of bilateral trade and investment,” the Swiss National Bank said.

    Alongside the pact, the PBOC will extend a pilot scheme for foreign investors to clients of Swiss banks, with a quota of up to 50 billion yuan ($8 billion).

    From Davos, Reuters adds:

    “We are willing to make Switzerland one of the centers of offshore RMB business,” Chinese Premier Li Keqiang told the World Economic Forum.

    He said China was committed to opening up more to the outside world, and planned to deepen reforms of financial services and foreign exchange…

    Can a “speculator attack” on the yuan-dollar peg be far behind?”

  3. The timing of the Swiss move was no mistake, as was the secrecy in which the move was executed. Now watch for the Swiss to refuse to take part any FATCA type of confidential financial client information sharing with the US.

      1. Michael – This just makes good business sense by the Swiss. You don’t continue to exist as a nation in the middle of Europe, surrounded by empires that have all come and gone, by making mistakes. This move was thought out and exercised according to a well laid plan. Smart move.

  4. Dave

    Thanks for bringing to light, the China-Swiss connection and its timing.
    I had a meeting on Jan 7/15 with a Commercial Officer at ICBC Canada in order to discuss cross border remnimbi settlement.
    ICBC Canada expects an announcement from their Head Honcho towards the end of January or early February regarding the implementation of the yuan swap centre in Canada. If and when we see this, it will confirm the pattern and the subsequent reactions in the currency market.

    Best regards

    John E

    1. John – The provincial government of British Columbia have sold not one, but two bond issues valued in the Chinese Yuan. Both were well received and well bid sell outs. Vancouver as well as Toronto, are vying for the distinction of being the Yuan swap hub. One more nail in the USD coffin!

  5. Get ready to try our exiting, dericious, new menu item, the McYuan Swissy!

    Our famous McEuro-Not-So-Deluxe is now available on our forex value menu.

    Who’s lovin it? The Chinese are rovin it!

  6. SNB announcement, Abenomics, ECBQE, gold repatriation, upcoming Greek vote (and these are just the things we know about) and now a Yuan trading hub in Zurich, all within the last few days/weeks/months. Circling the drain ever faster and shit is starting to get real.

  7. Not saying you’re wrong, but do you want to own the yuan? China seems like it could be more of a house of cards than even the US. I wouldn’t want to live there, their military is weak sauce, and their primary talents are copying and outright theft. Doesn’t seem like a strong foundation.

    I’m liking precious metals – gold, silver and lead.

  8. Whilst slumming around on youtube, I chanced upon this . Two years old but just as relevant (called 30 reasons to get out of real estate). Interesting.

  9. ‘We are going to destroy the Greek oligarchy system’
    Yanis Varoufakis could become Greece’s new finance minister if Syriza wins control of the government after Sunday’s election. Syriza is a leftist party, but this interview is fascinating and Varoufakis makes a number of sound points, including his objection to: some taxes, rent seeking oligarchs, the banksters and the elitist media.

    It is hard to see how Greece could be any worse off with Syriza in control than it us under the current ruling elite and it might even accomplish some good if Varoufakis is able to follow through on his calls for the elimination of many establishment barriers to free market activity.

    http://www.economicpolicyjournal.com/2015/01/we-are-going-to-destroy-greek-oligarchy.html

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