Swiss Franc Rises as European Stocks Fall With SNB Decision

The Swiss National Bank (SNB) stunned markets on Thursday, when it scrapped its three-year-old peg of 1.20 Swiss francs per euro.

In a chaotic few minutes after the central bank’s announcement, the Swiss franc soared by around 30 percent in value against the euro.

The franc broke past parity against the euro to trade at 0.805 per euro, before trimming those gains to trade 13 percent higher at 1.040.

The currency also gained 25 percent against the U.S. dollar, before falling back to trade around 12 percent higher at 0.901 francs per dollar.

SNB Chairman Thomas Jordan said the decision to drop the cap was not a “panic reaction,” and was a “well thought-out decision.” He added that he expected the value of the Swiss franc to ease back to “more sustainable levels”.

The move also hit European equity markets hard, with the Swiss benchmark stock index falling by more than 10 percent at one point.

“Pressure had been building on the cap for weeks, but the decision to scrap it so abruptly had markets reeling, with the DAX dropping by 250 points in a matter of minutes,” Daniel Sugarman, market strategist at ETX Capital, said in a note.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza