SNB Removes Franc Cap, EUR/CHF Reaches 0.94

Three years and four months after introducing its controversial 1.2000 EUR/CHF floor, the Swiss National Bank is abandoning it. At the same time, SNB decreased the interest rate from its current -0.25% to -0.75%.
EUR/CHF reaction is predictably volatile. The currency pair lost 2600 pips in under 25 minutes. It bounced from 0.94 support level and currently looks to be more or less stable near 1.04. Though, it may probably go significantly lower or recover some of the rapid losses during this trading session yet.

I am not sure why SNB did that. The explanation in the official statement looks inconsistent with their December monetary policy assessment and with the current macroeconomic situation in the country. Nevertheless, I am very glad that I have exited my huge EUR/CHF carry trade back in October. Needless to say, my 2015 forecast for EUR/CHF that I have posted less than two weeks ago is now inadequate.
PS: USD/CHF also took a lot of beating today and has shown twice more volatility within one day than during the whole trading year of 2014.

If you have been burned by this unexpected drop of EUR/CHF or if you happened to monetize from this Forex market disaster, or if you just want to share your thoughts on SNB’s reasoning or the future of EUR/CHF, please feel free to post them using the commentary form.

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