Morning Report Friday 16 January 2015
The Swiss give up their minimum exchange rate, is this the end of Central Bank intervention?
The Swiss surprised the market last night by removing their 1.20 Franc / Euro cap on the local currency, allowing free markets to prevail. The Swiss equity market fell almost 9%, after being down 12.9% earlier in the day, at the same time Gold and bonds both rallied strongly as they simply represent an easy place to hide as people attempt to digest the ramifications of the Swiss move – see chart 1. This reminds me of 1987, when it was disagreements between the US and Germany around interest rates, and the Deutsche Mark, that was the final nail in the coffin that led the ’87 crash unfolding.
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