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Market Brief
Yesterday’s surprise SNB intervention triggered sizeable volatilities on the FX markets. The EUR/CHF plunged to 0.85172, the record low, in a single move as soon as the SNB officially announced the removal of the 1.20 floor. The price discontinuities, lack of liquidity has been a major issue on the trading. The EUR/CHF realized volatility spiked to 75%, a record high.  USD/CHF tumbled down to 0.7406 in similar fashion. The volatilities remained sustained in Asia. The EUR/CHF traded in the wide range of 0.97536/1.02377. At this point, it is still too early to give a target level given that the pair has not traded free-float for the past three years yet there is talk that 1.10 would be acceptable level, fair value on the EUR/CHF. The jitters in the Swiss market will certainly continue given the uncertainties around the monetary policy. The SNB credibility got a serious hit on this action, which should keep traders, companies, funds and real money names alert in the coming weeks. Next week’s ECB decision gains sizeable importance as a consequence. The selling pressures on the EUR/CHF are expected to remain tight.

As the SNB announced the end of the floor verse EUR, meaning the end of massive EUR purchases, EUR/USD traded down to 1.1568, pulling out the 1.1640 target in a quite easy fashion. The pair remains well sustained above 1.1600 overnight. The sentiment in EUR-crosses remains solidly negative, especially now that the SNB decision increases suspicions that the ECB QE will concretize by January 22nd. Large put expiry at 1.1750, and more barriers below should limit upside attempts before the week’s closing bell. We remain seller on rallies. EUR/GBP hit 0.76278 with decent option barriers at 0.77, 0.78 and 0.7850 today. The Euro-zone December final CPI read should confirm deflation in the euro area.

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