Thursday 15th January 2015
We have seen an incredibly volatile market this morning, caused by a surprise statement by the Swiss National Bank. More on that in a moment, but to outline how choppy things have been this morning, in just 20 minutes we have seen Sterling/Euro rates go from €1.29, all the way to €1.31 before dropping back and settling below the key €1.30 level. A 2 cent move in such a short time is very unusual:
What’s even more unusual, is the Euro to Swiss Franc (EUR/CHF) rate that has crashed from 1.20, falling all the way to 0.75 before settling at around 1.04 at the time of writing. That’s a fluctuation of 35% in 20 minutes! This is probably the biggest move on any major currency pair I’ve ever seen. So what’s been going on?
Why are the currency markets so volatile today?
Switzerland, that’s why. The Swiss National Bank (SNB) this morning surprises as all by ending their peg to the Euro, which has been set at 1.20 for 3 years. They also slashed their interest rates. The SNB were worried about their currency becoming too strong, and so in order to keep this peg to the Euro, the SNB sold CHF and bought EUR as necessary to keep the rate at this level. The ending of the peg also ends this constant Euro buying, and the market has corrected itself accordingly.
This caused the Euro to weaken significantly, which is why we saw the GBP/EUR rate shoot to 1.31 and the EUR/CHF rate plummet by over 30%. This all happened between 9.30am and 10am this morning.
Things have now stabilised slightly and GBP/EUR is settled at just below €1.30, and EUR/CHF around 1.04. This really demonstrates how things can change significantly in a very small amount of time. Those clients that had accounts with us and Limit Orders in place have managed to take advantage of a very short-lived spike in the market.
Do you need to get the best exchange rates?
Get in touch with me today by making a free enquiry here. I can provide a free consultation on what’s happening with exchange rates, and provide you a quote on the currency you need. I can achieve rates very close indeed to the published mid-market rates, and these can be up to 5% better than banks.
This morning we have placed trades at €1.30 and above, whereas your bank would have likely offered rates around 1.25. This can save you a huge amount when converting large sums.