As The Dust Settles
07-09-2011
The Swiss National Bank provided a historic intervention on Tuesday for market historians. Essentially the SNB sold CHF and bought a massive amount of EUR in order to make the CHF weaker. The Central Bank also announced that it intends to keep a peg with the EUR around the vicinity of 1.20. The scope of the move took the market by surprise and caused a huge amount of volatility to rip through the Forex markets. However as the day progressed the EUR began to weaken against the USD and as of this morning the Single Currency is near its lows against the Greenback. However the CHF has essentially held onto its ‘weakened position’ and investors who have been using the Swiss Franc as a safe haven have been given reason to have second thoughts about the subject. Gold in the meantime has been nothing short of a rollercoaster ride with its gyrations and it is likely to continue to see an enormous amount of rapid fire trading.
Wall Street began Tuesday with steep loses although it was able to come off of the lows as the day progressed. The question for investors will be what happens next and the amount of lack of clarity that exists in the broad markets is a reason for the tumultuous sentiment. The EUR and GBP both find themselves near the lower ends of their value against the USD and it will be up to European policy makers to instill some confidence into the Single Currency. The GBP continues to trade under the EUR umbrella. However the U.K. does release Manufacturing Production data today that should be watched. The U.K. may be vulnerable to the European financial crisis, but its own economic data must be watched as it struggles to accomplish growth. European equities have also been trading with a rather negative demeanor and the German DAX has provided a vast decline the past month in this regard.
The U.S. will be quiet with data today. Investors are likely to remain focused on the European financial crisis and the pronouncements that come from various corners of the continent. The American economy remains a strong ingredient in the mix no doubt and the combination of E.U. and U.S. news has done little in the way of favors. For those that are seeking an optimistic tone, the major indexes on Wall Street did start to show some ability to gain towards the end of the trading session on Tuesday and Asia shook off the loses and propelled some of its own bourses higher this morning.
The AUD got stronger on a slightly better than anticipated GDP report earlier today. The AUD remains an interesting currency for traders because of its ability to move per global economic sentiment. The JPY lost a bit of ground to the USD, but the Bank of Japan made no changes to their monetary policy. The question is how the Swiss National Bank’s move yesterday will resonate in the global markets today as investors question what safe havens should be explored. U.S. and German bonds have seen great demand as investors have sought preservation. It will take a couple of days to allow the dust to settle from the Swiss intervention and it is a dead certainty other questions will rise up because of it.
