ECB DECISION, SWISS FRANC, GBPEUR 6 YEAR HIGH, QE?

The market is still in a state of panic since the SNB decision last Thursday. For those of you who don’t know what happened; The Swiss National Bank decided to remove their capped exchange rate on CHFEUR and cut interest rates to -0.75%. Following this we saw a 30% movement on currency pairs against CHF, this is what has caused panic amongst investors.

For those of you who are purchasing Euros, we are now at a 7 year high at 1.31, this time last week we were at 1.28; so if you were converting £100k into Euros, you are now about £3k better off if you waited until now to do your transaction.

This week the most important day on the Economic calendar is Thursday, the ECB will be set to announce their QE plan, and there has been a lot of speculation surrounding this which shows the amount of uncertainty around this speech on Thursday. Deflation has already arrived in the Eurozone, and QE is needed to start restoring the markets, especially since the SNB decision. The problem being that almost any plan announced on Thursday most probably will disappoint investors as it will be seen as “too little too late”.

If the Swiss National Bank can’t stand the heat about to emerge from the European Central Bank’s monetary kitchen, Mario Draghi must be cooking something explosive, right? That, at least, is what many in the market assume – that Draghi has persuaded the doubters and the ECB will serve full-blown quantitative easing on a colossal scale next week.

It may not be so simple. Expectations are so high that the rumoured €500bn (£390bn) programme of buying sovereign bonds might be viewed as a disappointment. The ECB is late to the QE party and deflation has arrived already in the Eurozone.

How about €1tn? That would be more impressive. But investors might conclude that a cap of any size betrays German hesitation and objections. Draghi, remember, is the man who, in another context, coined the phrase “whatever it takes”.

It is important to know that Draghi can say absolutely anything on Thursday, he can even say nothing which could be even more damaging to the markets, so please make sure that if you are looking to purchase currency that you are protected.

On top of this, please know that the Greek Election is on the 25th January so there will be even more volatility on the horizon, so for this reason I urge those of you who are looking to purchase currency, to please get in contact and I will be able to tailor make a solution for you that is cost effective, but more importantly, mitigates your exposure to the market.