FOREX: Swiss National Bank Surrenders

By Jameel Ahmad, Chief Market Analyst at FXTM

The currency markets were completely rocked yesterday after the shocking and completely unexpected monetary decision from The Swiss National Bank (SNB). Although the SNB has remained on front-line defence of the 1.20 EURCHF floor for a long period of time and repeatedly reiterated its commitment towards the floor, today the SNB surrendered that commitment.
This has sent the currency markets into complete shock and led to the USDCHF declining by an incredible 30% at one point today. It has also resulted in the euro declining to multi-year lows against the USD and GBP.

With the pressure on the ECB to provide further stimulus to reinvigorate a stagnant EU economy and combat dangerously low inflation levels intensifying in recent weeks and adding further pressure on the Euro, it might have just become too expensive to continuously defend the 1.20 floor.
Many also saw the SNB discontinuing its minimum exchange rate as a big clue to the markets that it is expecting the ECB to now follow through and introduce QE (possibly even next week) . Confirmation of this happening would have further devalued the Euro, and put further pressure on the EURCHF.
It is also possible that the SNB is preparing itself for the possible eventuality that the Russian Central Bank (RCB) might turn its attention to buying francs at some stage, as it repeatedly attempts to prevent Rouble weakness.

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