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Meet the Forecaster Who Saw Franc Gains Beyond SNB’s Cap

Updated on

After Switzerland’s central bank pledged the “utmost determination” to defend its currency ceiling last month, only one currency forecaster began this year predicting the cap’s demise.

When the Swiss National Bank removed its limit on the exchange rate today, Jason Schenker, president of Austin, Texas-based Prestige Economics LLC, was proved right.

Prestige was already the most accurate forecaster of the euro-franc currency pair in 2014 after Westpac Banking Corp., according to rankings compiled by Bloomberg. Its prediction that the franc would strengthen to 1.18 per euro this quarter was the only estimate among almost 50 analysts in a Bloomberg News survey calling for an appreciation of the Swiss currency through the SNB’s 1.20 francs-per-euro limit.

“Our forecasts have been predicated not necessarily on an exclusive lifting of the ceiling, but rather on the fact that the market direction for the euro and the Swiss franc would be basically unsustainable and indefensible,” Schenker, 37, who produces all the predictions himself, said today in a telephone interview.

In the hours following the SNB’s unexpected announcement today, the franc appreciated as much as 41 percent to touch 85.17 centimes against the 19-member currency, the strongest level on record.

Market Pressures

The euro is likely to see further “significant” weakness if European Central Bank policy makers led by President Mario Draghi announce government-bond purchases, said Schenker, a German literature and econometrics graduate who travels to Europe about four times a year to see clients.

A European Union court advisory opinion yesterday “clears the way for bond buying and the potential for the euro to move significantly lower,” said Schenker. “I’m not entirely sure if the decision made today was preemptive because the ECB may or may not make that policy decision next week, but I would say that the pressures in the market place likely dictated the removal of that cap.”

Schenker, who also provides forecasts for commodities and economic indicators, predicted the pound will rise against the euro alongside the franc as both nations’ economies will benefit from stimulus in the neighboring common-currency area.

“You would see those countries improve because you could see a spillover of the stimulus impact,” Schenker said in an interview on “Street Smart” with Trish Reagan and Matt Miller on Bloomberg Television. “The currency impact is secondary. The big impact here is the growth story.”

Austin was a desirable location to set up shop in August 2009 because of its low costs and proximity to his professional network, Schenker who previously lived in Houston, said in an April 2014 telephone interview.

The size of his staff fluctuates depending on projects, he said last year. While he employed less than 10 at the time, it has risen to about 20 people. The company had more than 48 clients and also does consulting projects, according to Schenker, a former consultant in Germany for McKinsey & Co.

(Updates with Schenker comment in ninth paragraph.)
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