U.S. Session Forex Recap – Jan. 16, 2015

  • US initial jobless claims: 316K vs. 290K and 297K previous
  • US NY manufacturing index: 10.0 vs. 5.0 expected, -3.6 previous
  • US PPI: -0.3% vs. -0.4% expected, -0.2% previous
  • US Philly Fed manufacturing index: 6.3 vs. 18.7 expected, 24.3 previous
  • SNB shocks FX markets by abandoning EUR/CHF’s 1.2000 floor and cutting interest rates

What a day for forex traders! Thanks to the SNB’s surprise announcements, volatility picked up across the board. Which currencies gained and which ones lost?

The biggest story in the forex scene was the Swiss National Bank (SNB) surprisingly abandoning its 1.2000 peg on EUR/CHF. Not only that, but it had also unexpectedly cut its rates from -0.25% to -0.75%. If you recall, around 3.5 years ago the central bank had promised buy whatever amount it took to defend the franc’s value against the euro.

But the SNB can only buy so much. With the European Central Bank (ECB) widely expected to announce a set of quantitative easing (QE) measures next week, it seems that the SNB is abandoning the ship before it sinks.

The unexpected announcements led to the franc rocketing across the board. CHF/JPY led the pack with a 1,870-pip jump (+16.24%) for the day, followed by EUR/CHF’s 1,911-pip drop (-15.91%), GBP/CHF’s 2,331-pip (-15.02%) decline, and USD/CHF’s 1,495-pip fall (-14.68%). For comparison, USD/JPY, our biggest major currency pair move in 2014, rose by 13.78%. Yikes!

The SNB’s impact didn’t stop at the franc though. For starters, the SNB giving up its peg supported speculations that the ECB would announce a set of QE next week. This is probably why EUR/USD ended the day 172 pips lower (-1.46%) than its daily open price, EUR/GBP fell by 82 pips (-1.06%), and EUR/JPY closed with a 313-pip loss (-2.26%).

The yen also benefited from the uncertainty of the impact of the SNB’s decision. The low-yielding currency gained 220 pips (+1.23%) on the pound and 95 pips (+0.81%) on the dollar. Last but definitely not the least, the comdolls had a mixed day with some investors taking profits on their investments while others flocked to high-yielding bets.

AUD/USD capped the day with a 69-pip increase (+0.85%), NZD/USD closed with a 102-pip gain (+1.32%), while USD/CAD closed at 1.1964 after dropping to a low of 1.1803.

Asian session forex traders are up today and, with only Japan’s tertiary industry activity on tap over the next couple of hours, it’s likely that we’ll see extensions of yesterday’s moves.

See also:

Asian Session Recap

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