These are the days

I got a call from Ryan at 4:45 am about the EUR/CHF floor and thought, “These are the days you live for as a foreign exchange trader.”

In some ways you just hope to dodge enough bullets to hit the payload on a trade like short EUR/CHF. But I sympathize with anyone who was on the other side of the trade and I suspect a few brokers may have put themselves in a tough position.

EUR/CHF has gone strangely quiet and that won’t last. I suspect it will head lower as larger positions are unwound and the SNB abandons whatever kind of managed float it’s working with.

At the moment, money is flooding into the commodity currencies. My guess is that billions that were locked up in EUR/CHF trades are moving elsewhere. Other money might just be trying to get as far away as possible to avoid the fallout.

My inclination is that the euro should weaken. The big question I have is: How did the SNB do this? They might have been unloading euro reserves over the past month but it would be a remarkable achievement to do that so quietly. Otherwise, they were once a massive euro buyer that’s disappeared. I would also have to believe they know that sovereign QE is coming.