This week has seen a double whammy for the Eurozone and the price of the Euro. Firstly the market reacted to the new raft of stimulus packages expected to be announced this week, including the printing of money to buy up Euro bonds.
However just as the market took their positions on what levels this quantative easing would be set at the Swiss government lobbed a proverbial hand grenade into the mix. Since 2009 the Swiss central bank has artificially held back the price of the Swiss franc by buying other currencies and offsetting them. However the Swiss Central bank this week decided that it could no longer carry on with this practice and stopped. The immediate effect was a 40% swing in the exchange rate with the Euro, which later settled at 16%. The Swiss Central Bank tried to counter this by introducing negative interest rates to stop money flowing into the country and inflating the currency yet further. Swiss stocks all took an instant hit as both their exports and their income streams would be predominately in Euros and these were down 16%.
