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16 Jan 2015
SNB shock scrapping of CHF - Westpac
FXStreet (Guatemala) - Sean Callow, analyst at Westpac Banking Corporation ABN noted the Swiss National Bank’s shock scrapping of the CHF cap that caused a historically massive appreciation of the franc (+21% vs USD).
Key Quotes:
"EUR was weakest of the G10 as markets took the SNB decision as confirmation of large scale ECB QE next week."
"The SNB announced the end of the EUR/CHF 1.20 floor introduced in Sep 2011 and also cut the interest rate on on-call deposits bank hold with it from the planned -0.25% to -0.75%. Its interest rate benchmark, CHF 3mth LIBOR was lowered from a -0.75% to 0.25% range to -1.25% to -0.25%."
"The SNB said that the divergence between Fed and ECB monetary policy meant CHF was falling against USD and would continue to do so, making the CHF cap unjustified. It did say however that if necessary it would “remain active” in FX markets."
"This decision came just days after SNB president Jordan insisted the CHF cap would be defended to maintain correct monetary conditions, ensuring maximum surprise."
"EUR/CHF fell from a touch above 1.2000 to 0.8500, a staggering -29% collapse that ranks among the largest in developed market FX history."
"It is not clear how much trade occurred at this level, probably not much. Most of European trade was in a rough 1.01-1.06 range, followed by a drift to back under 1.00 late NY."
Key Quotes:
"EUR was weakest of the G10 as markets took the SNB decision as confirmation of large scale ECB QE next week."
"The SNB announced the end of the EUR/CHF 1.20 floor introduced in Sep 2011 and also cut the interest rate on on-call deposits bank hold with it from the planned -0.25% to -0.75%. Its interest rate benchmark, CHF 3mth LIBOR was lowered from a -0.75% to 0.25% range to -1.25% to -0.25%."
"The SNB said that the divergence between Fed and ECB monetary policy meant CHF was falling against USD and would continue to do so, making the CHF cap unjustified. It did say however that if necessary it would “remain active” in FX markets."
"This decision came just days after SNB president Jordan insisted the CHF cap would be defended to maintain correct monetary conditions, ensuring maximum surprise."
"EUR/CHF fell from a touch above 1.2000 to 0.8500, a staggering -29% collapse that ranks among the largest in developed market FX history."
"It is not clear how much trade occurred at this level, probably not much. Most of European trade was in a rough 1.01-1.06 range, followed by a drift to back under 1.00 late NY."