There has been plenty of upheaval in the European economy recently, and a fresh announcement by the Swiss National Bank has caused even more of a challenge to the financial markets.
The bank recently announced it would no longer be using the currency ceiling that was first introduced during the recent Eurozone crisis. In a press release, the Swiss National Bank stated:
“The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets. This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. The economy was able to take advantage of this phase to adjust to the new situation”.
The press release goes on to explain that the Swiss Franc had weakened against the dollar so the bank had come to the conclusion that it could not justify keeping the minimum value cap in place.
Following the announcement of the removal of the currency cap local stock markets fell in value dramatically, ending the day 10% lower than they started out.
Swiss Franc Rallies
Upon announcing the news, WorldFordFunds.com, reported that the Swiss franc put in a strong performance against the euro and against some of the world’s other major currencies, while the local stock market experienced a dramatic fall and finally closed on -8.7%.
The announcement by the Swiss National Bank could have many negative consequences worldwide. The Telegraph explains that as a result of the currency cap removal, holidays to Switzerland could get more expensive, and it could add additional costs to goods that are manufactured in the country, including luxury watches.
Mortgages and Investments
If you live in Switzerland and have mortgage in Francs, The Telegraph also details how the cost of a mortgage could be about to get a lot more expensive; UK residents that own property in Switzerland could soon find themselves paying an increased amount on their monthly mortgage repayments.
Nonetheless, with the Franc growing in strength, financial experts state that this could be an ideal opportunity to invest in the currency. Switzerland is a popular country for investors from the UK and their investments could be worth more following the surge in the Franc.
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