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Swiss Franc Skyrockets on Swiss Bank Policy Changes


In one of the largest currency moves seen in recent year, Swiss Franc futures soared today, moving from close to 0.98 to above 1.22 in a matter of minutes. This sent shockwaves through nearly all markets as the EUR and USD were also affected.

The Swiss Franc Futures ($6S_F) 1-minute chart shows the massive move.

Figure 1. Swiss Franc Futures (March) 1-Minute Chart

In related trading, the USDCHF currency pair lost an entire year's worth of gains in a matter of minutes.

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Figure 2. USD/CHF Currency Pair Daily Chart

usdchf.jpg

The moves occurred for one main reason:

  • The Swiss National Bank had said prior that they would hold the EUR/CHF currency pair above 1.20. Many traders were long Euros and short Francs (CHF) anticipating the Swiss would continue to hold the rate. Today the Swiss ended the peg and as a result the Swiss Franc skyrocketed, fueled by stop loss orders to exit (buy back) CHF short positions.

The SNB also reduced the target deposit rate to negative 0.75%. With the European Central Bank expected to implement sweeping quantitative easing measures within the next month, the SNB would be unlikely to defend against a weakening Euro anyway.  Today they opted to back off the peg and let the Euro weaken now, as opposed to later.

In light of the massive move, those that survived, or made a fortune, may be tempted to get back in anticipating another big move. More big moves are likely to play out in the coming weeks in Euro and Swiss Franc currency pairs and futures markets. In the next week a direction bias is likely to emerge, providing trading opportunities.  Stay tuned.

 

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