A Swissie Sigh of Relief
- The "biggest surprise" overnight was the "breakout move" in the euro/Swiss franc currency pair which hit €1.2270 – the highest level in over a year – on "growing investor confidence" in the euro zone's financial situation, per BK Asset Management.
- Recall the Swiss became one of the world's biggest buyers of foreign reserves last year as the central bank refused to allow the currency, benefitting from safe-haven flows out of the euro zone, to appreciate beyond €1.20; the super-strong Swissie was seen as a threat to tourism and exports, two of Switzerland's most important industries.
- Now, the pressure is starting to come off; renewed confidence in the euro zone is supporting the unwind trade, bolstering the euro and opening "the path to late 2011 highs near the 1.2400 level," notes BK; "With periphery sovereign debt yields in both Italy and Spain declining markedly over the past several months the risk of fracture has been reduced significantly. Therefore the 'euro breakup' trade is being unwound with EUR/CHF one of the key beneficiaries."