More than a year ago, on the 15th of January 2015, the market was shocked by the sharp move of the Swiss National Bank (SNB) abandoning the cap of the Swiss franc to the euro. I dedicated a special post to that event. This time, I've made a comparative chart for the period from the start of 2015 until today to show you how the SNB's move affected the safe haven currency for the past 13 months.
The Swiss franc is in an inverse cross here (CHFUSD) to comfort your perception of both assets dynamics against the US dollar.
Chart 1. Gold vs. Swiss Franc: Gold Wins Again
Chart courtesy of tradingview.com
The shock was short-lived as the currency quickly lost the gains during the first quarter of 2015. The Franc caught up with falling gold in a very tight correlation. They bottomed at the same time in March of 2015 and then reversed to the upside and peaked in May of 2015. The similarity of trends continued with the metal gapping deeper on the drops. Rare short interruptions of the link occurred last December and this month when gold increased its value and the franc didn't. Continue reading "Safe Haven Test: 1+ Year After SNB Shock"→
It's only the middle of the year, but we've already seen quite a lot, even for the seasoned investor.
The Swiss National Bank (SNB) kicked off the ball in January for what has proven to be a nightmare year thus far. It's caused a lot of tears and fears among investors, some of them went bankrupt in one day after it let the franc go.
Greece and it's possible leave of the single currency zone has been dubbed the "Grexit." It's added turmoil to the markets over the last month with currencies crosses opening with gaps on the last two consecutive Mondays. The single currency zone has never been so vulnerable from the day of its launch, as Greek precedent can find followers and bring Germany a lot of headaches furthermore.
The United Kingdom also played its role with the Queen's speech this May containing words of possible divorce with the European Union in 2017, which was named "Brexit" (Britain's exit) a la Grexit.
Forex brokers like FxPro.co.uk, global banks and traders can only watch with bated breath, waiting to see whether the country removes the fixed exchange rate policy that's been in place since the 1930s.
In the aftermath of the chaos caused by the Swiss National Bank's (SNB's) shock decision to remove its currency ceiling, investors are now beginning to ask whether Denmark could soon do the same.
If you listen to some market observers, the record low yields in the Treasury bond market are warning us that the American economy is on the verge of falling into the same deflationary abyss of the euro zone and Japan. Like the Chicken Little story, if bond yields are falling, the sky must be falling, too.
With the yield on the 30-year T-bond hitting its lowest level ever last week, even lower than during the global financial crisis, they’re worried that if the Federal Reserve raises interest rates soon, we’ll shortly be back to the bad old days of 2008 and, even worse, 1929.
No less a figure than Paul Krugman, the New York Times’ economics commentator, wrote that the Swiss Central Bank’s move last week to decouple the franc from the free-falling euro is a portent of what could happen to us if we let our deflationary guard down. Continue reading "Chicken Little and the Bond Market"→
By now you’ve heard the news; a Swiss tsunami has hit FX markets. In a historic move that took even the most seasoned investors and experienced brokers by complete surprise, the Swiss National Bank (SNB) has removed the 1.2 floor for the EUR/CHF, effectively eliminating the Swiss Franc’s peg to the Euro. The Swiss Franc, as a result, surged a jaw dropping 38% vs the Euro and 29.7% vs the Dollar in only a few hours, leaving Swiss equities tumbling and Swissie bears crushed. Undoubtedly, this aggressive move and the volatility it generated will be talked about for years. But what does this SNB move say about Switzerland, about the Euro and, more specifically, about the Swiss Franc’s future? Continue reading "The Ramifications of the SNB Move"→