Franc is no longer sovereign! Swiss National Bank announced that it is putting a ceiling on the currency's exchange rate and fixed EUR at 1.20 CHF. The statement by the Swiss National Bank stated that "The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities."
By doing this, Switzerland effectively abandoned its economic sovereignty and this decision had several immediate effects.
1. The franc dropped 8.8 percent versus the euro which is the largest fall ever for this currency.
2. Gold priced in Swiss Francs jumped from 1,500 to over 1,600 per ounce in less than a minute. Since Swiss Franc was one of the last sanctuary currencies, it is to be expected that the gold price will continue to rise since it is the only remaining safe heaven.
3. This decision did bring quick boost to the EURO as the dollar fell 0.6 percent to $1.4076 per EUR.
4. Swiss exporters like Nestle are expecting a short-term boost in their sales.
However, long-term effects could be that this decision placed Switzerland in the same situation as Portugal, Greece, Italy and others. Since Swiss government will now join the world trend and try to out-print other EURO zone countries, we will see a loss of sense of value and decrease in all investments.
It is really impossible to predict the future but one thing is sure, Franc will never be the same!