What's going on here? This seems to be a surprise? Of course, who really knows?Personally, I have a bit of a problem believing that any bank would make such a surprise move. The Swiss National Bank rocks the Market?
The Swiss National Bank shocked investors by ditching its currency ceiling against the euro and slashing its deposit rate to negative 0.75%.
Check out the original url on this breaking news: http://www.marketwatch.com/story/us-stocks-rebound-on-tap-as-futures-su… US stocks were all set for a rebound, but, now? Swiss franc rockets after SNB ditches euro cap
ZURICH--The Swiss franc rocketed beyond parity with the euro on Thursday after Switzerland's central bank stunned markets by scrapping its long-standing cap on the strength of the currency.The franc surged more than 20%, ending more than three years of calm in Swiss foreign exchange markets. The Swiss National Bank has intervened in markets since September 2011 to prevent the franc climbing too high, acquiring billions of euros in an effort to stop the common currency dropping below 1.20 to the franc.In the aftermath of the SNB's shock move, the euro plunged as low as CHF0.93."This is a very unexpected development," said Vasileios Gkionakis, currency strategist at UniCredit. "This is a clear and significant divergence from the rhetoric so far of 'enforcing the floor with utmost determination.' Medium term I am worrying about the implications on SNB's credibility...the change in language was very abrupt."
Was the move by the Swiss bank an attack on the Euro? While assisting the US dollar?
The impact reverberated throughout currencies markets, sending the euro plunging against the dollar to $1.1579, its lowest point November 2003. The dollar also shot higher more broadly, with sterling adding a cent to $1.53.
Swiss central-bank shocker: It’s a ‘tsunami’; it’s a ‘bombshell’
• “With ECB easing coming up, and worries over both Russia and Greece looming, we cannot rule out that the SNB will have to do more than today’s rate cuts to curb the strength of a floating Swissie.” — Danske Bank analysts • “The timing of the move is a surprise, coming just a month after the last change in interest rates. But it could well be that the SNB has chosen to front-run the likely move to QE from the ECB, whether than happens next week or the subsequent meeting in March. ... Clearly, the SNB felt that they were giving with one hand and taking away with the other by moving rates further into negative territory. But at this point in time, the SNB has broken a dam wall and the waters have flooded out. It will take time to see what lies beneath.” — Simon Smith, chief economist at FxPro “If sustained, the impact of the decision on Switzerland’s economy could be significant for a few years. Exporters will suffer lower price competitiveness and might move more production outside the country. Tourism and retail trade are also likely to suffer. A period of strong deflation is a serious risk. However, the Swiss economy is used to occasional periods of overvaluation and should ultimately be able to cope.” — Christian Schulz, senior economist at Berenberg
Any help in understanding this would be greatly appreciated- I know there are very well informed persons lurking about- What do you think?UPDATES:#1-Swiss mess could make oil plunge seem like minor hiccup
One day, it’s gold. The next, it’s equities. Most days, it’s crude. On Wednesday, it was copper. On Thursday it was the Swiss franc and Swiss stocks. And the move in those two makes those others look like minor-league hiccups. While you were sleeping, all hell broke loose in Switzerland, as the central bank ditched its currency cap against the euro after four years and slashed interest rates to negative 0.75%. The Swiss franc is rallying wildly, while the Swiss stock market is cratering
#2-Why the currency wars are likely to hit the stock market
Scutify Chart(s) of the Day: Amazing how similar the 1-hour, 1-quarter and 1-year charts of the U.S. dollar versus the Swiss franc are. No so for the 1-day chart, though. Anyway, this is all about the currency wars and these types of dislocations in a currency market are likely to have some huge ramifications for some companies’ earnings, for some of the large casino banks, for hedge funds and for economies at large. Governments of developed and developing countries have been manipulating their fiat currencies for my whole lifetime and I don’t expect it to stop any time soon. The entire Swiss GDP is about $650 billion, about equal to the market cap of Apple. So it isn’t like the Swiss franc is ever going to replace the U.S. dollar as the world’s reserve currency. Most currency war outcomes still favor the U.S. dollar for the next few years. I still think after we get some temporary fear built into the stock markets from these currency dislocations, we’re likely right back into the bubble-blowing bull market we’ve been successfully riding for the last five or six years.
And I love this quote!
“No one talks about the birth and death rates of American business because Wall Street and the White House, no matter which party occupies the latter, are two gigantic institutions of persuasion. The White House needs to keep you in the game because their political party needs your vote. Wall Street needs the stock market to boom, even if that boom is fueled by illusion. So both tell us, ‘The economy is coming back.’ — Jim Clifton, chairman and CEO of Gallup,