Europe recovers after SNB shock, US mired in its own poor data

The markets managed to recover this afternoon after they were blindsided by a Swiss National Bank decision to remove the franc’s currency ‘ceiling’ and slash interest rates to -0.75%.

The forex is still feeling the effects of this shock announcement, with the EUR/CHF and USD/CHF down around 14%. However, this is comparatively positive compared to the 25% losses they suffered when the news was first revealed. The SNB blamed various ‘international developments’ including changes to the euro-dollar rates and the political and economic nightmare developing in Russia as the reasons for its decision. However more important is the implicit signal in this move of the ever-increasing likelihood of Eurozone QE, as the SNB appears to have decided it would be unable to maintain its currency cap in the face of such wide-spread stimulus.

The SNB’s FX surprise was just more bad news for the euro, which was already suffering on the mere hope of QE; with this move effectively confirming a stimulus announcement by the ECB next week, the currency can expect to struggle for a while in a sad replication of the yen’s reaction to Japan’s own quantitative easing implementation. As the euro continued to sink to new lows against the dollar, the Eurozone indices carried on with their imitation of a rollercoaster, its latest move a big upswing after this morning’s declines. After the initial shockwave of the SNB’s revelation passed, the region settled into making gains as more and more analysts pointed to the Swiss decision as a major signal for QE. It remains to be seen whether it can hold onto this bullish sentiment, as the behaviour of the European indices has been erratic at best recently.

The FTSE followed similar patterns to the worldwide indices today, gains followed by a price-haemorrhage caused by the SNB decision that appears to have taken the world by surprise. However, as the Eurozone began to grow the FTSE followed suit, as it too would benefit from a more stable, i.e. QE-filled, European region. The UK index was also helped, in a rare sighting on the markets of late, by growth in the commodity sector. Both oil and copper continued to rebound today, allowing the FTSE to put distance between it and its struggling commodity-based stocks.

Sadly for the US markets, the Dow Jones et al. couldn’t join in with the European rebound party. After PPI figures remained the same, and core PPI grew to 0.3%, the US markets appeared to focus instead of the rise in unemployment claims, yet another sign of the failures to make the USA’s economic ‘recovery’ felt by the average American. This was joined by a disappointing Philly Fed manufacturing index figure that further compounded the poor time the US markets have had recently.