Video: The Deeper Implications of the SNB’s EURCHF Policy Break

Talking Points:

• The SNB shocked the market by announcing it was dropping its effort to hold the EURCHF 1.2000-floor

• Both the EURCHF and Franc crosses suffered 'black-swan' level volatility, but the implications run deeper

• Beyond direct issues for Switzerland, the global financial market finds itself at greater risk

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The Swiss National Bank (SNB) shocked the FX market Thursday when they brought a sudden end to a 3-year policy effort of keeping EURCHF above 1.2000. The ramifications for the target EURCHF exchange rate and other Swiss Franc crosses are obvious with extreme volatility. However, such an unorthodox move is not going to be an event isolated to one pair and one day. Volatility will remain exceptionally high for all the Swiss Franc pairs for some time. Beyond the Swiss currency, the Euro has lost one of its most persistent bids. Further, such a move may reinforce an expectation that a major ECB stimulus move is coming. Yet, the most profound implications may not be fully realized. The markets' incredible climb - and even financial stability - these past six years has been firmly rooted in smooth global monetary policy. Does this failure by a major central bank threaten the fragile balance of confidence? We discuss the implications of the SNB's actions in today's Strategy Video.

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