Forex Marketz Daily Forex News – Fully Markets Update
USD/CHF (0.8794)
Today the Swiss National Bank (SNB) surprised the Forex and financial markets when they announced that the Swiss franc would no longer be pegged to the euro at 1.20 EUR/CHF. Please look at the below EUR/CHF 5 minute MT 4 chart. In addition to ending the peg to the euro, the SNB lowered its benchmark rate to -0.75 percent.
This announcement took the financial world by storm, especially in the currency and bond markets. The Swiss franc also soared higher against the Dollar, see the below 5 minute MT 4 chart. We also saw a broad impact in other financial markets as the yield on the German 5 year Bund fell to a record low at -0.154 percent. That is a jaw dropping low.
This announcement was a shocker but is a good and sensible move by the SNB. The Swiss are getting ready for the imminent quantitative easing program (QE) from the European Central Bank (ECB). That move would put the SNB under great pressure to maintain the 1.20 peg. There response is preemptive. Yesterday, the Eurozone’s top court ruled that the ECB’s OMT mechanisms were binding, paving the way for the ECB to initiate a massive QE program for the entire common currency bloc.
Essentially, the SNB no longer sees being pegged to the euro as valid or justified.
