Yesterday the Swiss National Bank announced that they would take unprecedented measures to weaken the Swiss Fanc. They have stated that their intention is necessary to coerce the currency into a stable state above 1.20 EUR/CHF. The announcement saw one of the biggest moves seen in the currency markets for a decade.

The SNB’s intention is to buy unlimited amount of currencies on the wholesale market in an attempt to try and dictate price action. This is somewhat contentious as the FX market is a trillion dollar market and it is debatable whether the Swiss can actually control the price. It is clear however that at the moment the market seems to believe that they are capable of stabilising the Swiss Franc through currency intervention with yesterday the Swiss Franc weakening by 8% against most of the world’s most actively traded currencies.

The main benefactor of yesterday’s SNB announcement has been the US Dollar, investors will undoubtedly no longer see the CHF as the safe haven currency of choice with uncertainty clouding where price should sit. They have therefore reverted to the USD the historic safe haven of choice. As a result the key levels GBP/USD 1.60 and EUR/USD 1.40 were broken in afternoon trade yesterday. The EUR/USD has however managed to recover and climb back through 1.40. We remain sceptical on ongoing USD strength and would call for a correction in the coming weeks.

The ongoing concern over the European sovereign debt crisis has helped the Dollar gain on a fall in risk appetite. Global stock markets have suffered in the past couple of days as concerns mount and subside in a cyclical fashion. It is therefore likely that the sovereign debt crisis will continue to take centre stage and dominate price action.