Swiss Franc shoots up

15 Jan Swiss Franc shoots up

In today’s news the hot topics are

• Swiss Central Bank’s decision to remove the rate ceiling of the Swiss Franc exchange rate
• US dollar momentum slows as commodity currencies are rising as commodity short positions are being squared
• OPEC forecasts rising oil prices and slow down in the US supply of crude resulting in higher crude prices
• Canadian Dollar Exchange Rate trending higher this morning
• Uncertainty around the GBP as elections are around the corner

Swiss Franc (CHF):

Today’s biggest news comes from the Swiss central bank. The Swiss National bank held an unscheduled meeting today in which the outcomes shocked the global currency exchange markets. The Swiss central bank today removed their rate ceiling of 1.2 Swiss Francs to the Euro. This exchange rate cap was introduced in 2011 during the euro-zone crises to limit the flow of cash.

This resulted in the Swiss Franc surging against the Euro, US Dollar, and UK pound, despite news that the Swiss interest rates were being cut to minus 0.75%.

Canadian Dollar:

The Canadian Dollar is trending higher today versus most of its rival currency despite disappointing domestic data that came out. The surge is partially a result of rising oil prices, after OPEC reported that they are forecasting slower growth in the US oil supply.

OPEC’s monthly repot indicated that they are forcasting rising oil prices, under their view that US supply will slow. However, production record from the US last week shows that despite a 12 percent cut in rig counts in the US, there doesn’t seem to be enough bases to see a reduction in production coming from the US.

Swiss central bank news today also benefited the Canadian dollar and resulted in it strengthening against the U.S. Dollar. This is because the increase in the Swiss Franc exchange rate resulted in boosted commodities from oil to gold, resulting in foreign exchange traders to scale back their bets on a further rise in the value of the American Dollar. Swiss’s news does not change any of the fundamentals affecting the Canadian dollar and any further gains would be a result of a change in crude oil prices amongst other news.

Pound (GBP):

It is normal for currency to decline when important elections are around the corner as a change in leadership would dictate a change in monetary policy. However, the decline in the GBP exchange rates is greater due to uncertainty around Britain’s position in the EU.

Currently there is no clear show of any front runner. If the UK Independence Party gains power it is likely we will see a swift exit from the EU, and if the conservatives win, a referendum will take place. This makes the pound currency exchange rates to be volatile until opinion polls have a clear show of a front runner.

Today the Pound Sterling to Canadian Dollar (GBP to CAD) exchange rate dropped to a low of 1.7996.