The markets reacted positively to the move by the SNB to peg the CHF to the EUR at a rate of 1.20 EUR. In addition to the EUR/CHF making a dramatic climb higher European equities have come off of their lows. However, the momentum the EUR saw following the announcement was short lived.
The SNB will be in for a long fight versus the market as it has pledged to maintain the EUR/CHF exchange rate above the 1.20 floor via purchasing, "foreign currency in unlimited quantities". According to BNY Mellon's Simon Derrick , now the SNB has to figure out what it will do with all those euros it will buy as it has previously pledged to purchase only German and French sovereign debt. This makes one wonder, how does the SNB really feel about peripheral Europe?
Initially markets cheered the move to peg the CHF to the EUR with European equities moving higher. Both the AUD and EUR came off of their recent lows against the dollar. However, the chummy mood did not last long and while European equities remain in the black the EUR/USD has lost most of its gains after reaching as high as 1.4280 and closing the weekend opening gap. Now the pair stands below the 1.4080 level at print time. It appears that periphery concerns of Greece and Italy continue to weigh on the EUR. It will be interesting to see how the CHF peg will stand up should the euro zone continue to hound both Europe and now the SND which has practically ceded control of its monetary policy to the ECB .
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