Thursday, January 15, 2015

1997 Deja Vu: Swiss Central Bank Capitulates


The Swiss Central Bank just eliminated its Euro peg, in anticipation of ECB Money Printing, aka. Quantitative Easing
Due to the erstwhile Euro peg AND ultra low Swiss interest rates, the Swiss Franc was one of the top carry currencies along with Japan Yen and of course U.S. dollar. So now, just as the U.S. dollar is strengthening across the globe annihilating dollar borrowers, the Swiss Franc just gained 15% OVERNIGHT against the U.S. dollar.

Carry traders were massacred. Stock futures sold off massively, but then Goldman Sachs indicated that this is all in preparation for European Quantitative Easing. So the dopium addicts are trying to see past the pain:

"This is a massive message from SNB to the market : ECB is going to do QE, and it’s going to be big..No way I am keeping buying EUROs here"

First Market will have to digest the pain of a 28% move [In the Swiss Franc] at some point, also the USDCHF is down 15% which will HURT in the current long USD environment

Past that first wave, market will realise what it means for EURUSD..."

What this means is that the ECB wants the Euro/dollar (below) even lower, hence more money flowing into Dow Casino from Europe, now at a 69 year high:



LTCM Redux:
Macro hedge funds short the Swiss Franc "no-brainer-trade", just got monkey hammered, so the dislocations have yet to be revealed...