An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
didnt know they put on a -0.75 policy rate at the same time.... (where was it? 0?)
They probably thought that would help the domestic economy handle any negative effects of the exchange rate policy change....
Its fiscal drag.... (like you say "a tax"....
Cant imagine the reaction of the Swatch guy will be to increase the prices on his watches in Euro terms in response to this... probably will lower his prices in Euro terms in an attempt to increase volume as the price of his exports just got reduced in CHF terms (to him).....
If so would be bearish for the CHF vs the Euro... maybe let this shake out a bit and eventually short the CHF vs Euro?
As Swiss exporters respond to this policy change and new domestic fiscal drag by lowering the prices of their exports to the EZ in Euro terms...
A lot of Swiss exports are Veblen goods, so a price rise might actually be bullish as they become even more exclusive and a sign of superabundant wealth.
Right Tom hard to say.... need to identify a market basket of Swiss goods and monitor the prices in Euros.... the real goods prices should lead the currencies...
Greed makes me think they will discount... they are used to getting the 1.23 now they only get 1.00. So they need to get back to the profits that the 1.23 brought somehow.... Unless like you say they dont want to trash the brands...
before a EU traveler could get a 123 franc room for 1 Euro... now 1 Euro comes up short for the same room.... only 100 franc...
So the hotel is probably going to have to lower the price of the room in francs to maintain occupancy rates... reduces Swiss real terms....
This thing might just go right back to 1.23 if the firms lower their domestic prices in francs for EZ visitors and/or if they lower the price of their exports to EZ in Euro terms.... if CB is really letting it "float"...
6 comments:
didnt know they put on a -0.75 policy rate at the same time.... (where was it? 0?)
They probably thought that would help the domestic economy handle any negative effects of the exchange rate policy change....
Its fiscal drag.... (like you say "a tax"....
Cant imagine the reaction of the Swatch guy will be to increase the prices on his watches in Euro terms in response to this... probably will lower his prices in Euro terms in an attempt to increase volume as the price of his exports just got reduced in CHF terms (to him).....
If so would be bearish for the CHF vs the Euro... maybe let this shake out a bit and eventually short the CHF vs Euro?
As Swiss exporters respond to this policy change and new domestic fiscal drag by lowering the prices of their exports to the EZ in Euro terms...
rsp,
A lot of Swiss exports are Veblen goods, so a price rise might actually be bullish as they become even more exclusive and a sign of superabundant wealth.
Right Tom hard to say.... need to identify a market basket of Swiss goods and monitor the prices in Euros.... the real goods prices should lead the currencies...
Greed makes me think they will discount... they are used to getting the 1.23 now they only get 1.00. So they need to get back to the profits that the 1.23 brought somehow.... Unless like you say they dont want to trash the brands...
Probably could keep an eye on it... rsp
rsp
What about Tourism...
before a EU traveler could get a 123 franc room for 1 Euro... now 1 Euro comes up short for the same room.... only 100 franc...
So the hotel is probably going to have to lower the price of the room in francs to maintain occupancy rates... reduces Swiss real terms....
This thing might just go right back to 1.23 if the firms lower their domestic prices in francs for EZ visitors and/or if they lower the price of their exports to EZ in Euro terms.... if CB is really letting it "float"...
rsp
Veblen goods
Like the way most people shop for wine. Haha.
watch for "last minute deals" on Swiss ski packages for the rest of the winter...
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