The Swiss National Bank's surprised move to end the minimum EUR/CHF exchange rate triggered sharp jump in financial markets volatile, which carried on into today's Asian session. Swiss Franc surged over 40% and was recorded as the large currency move on record since the Bretton Woods system in 1971. US equities ended lower with Dow losing -106.38 pts or -0.61% at 17320.71. S&P 500 lost 18.6 pts, or -0.92% to close at 1992.67, below 2000 level. Risk aversion continued in Asia with Nikkei down over -240 pts, or -1.4%. U.S. 30-Year yields dropped to 2.411 while the U.S. 10-Year yield dropped to 1.775. Crude oil attempted to recover and breached 50 but is now back at around 46.5. Gold jumped to as high as 1267.2 and is now at around 1260.
In less than a month after the SNB pledged to maintain the EUR/CHF floor at 1.2 with utmost determination, it, on Thursday, surprised the market by announcing to abandon this commitment. The move was accompanied by reduction of interest rates on sight deposits by -0.5 percentage point to -0.75%. The central bank indicated that Swiss franc has depreciated and helped the economic recovery during the period when the floor was imposed. It also appeared positive that the divergence between the Fed and the SNB over monetary policy outlook should lead to decline of franc against the US dollar. Yet, we view this abrupt move as an evidence that the SNB has realized that, give the small size of Swiss economy, it would be impossible for fight against euro's depreciation as the ECB would likely extend its QE measures. EUR/CHF slumped after the announcement and plummeted to a record low of 0.85. USD/CHF also tumbled to as low as 0.7424 before recovery.
Elsewhere, Japan tertiary industry index rose 0.2% mom in November. German CPI and Eurozone CPI final reading for December will be released in European session. Swiss will release retail sales. From US, CPI, industrial production and U of Michigan sentiment will be released.