Where does SNB go from here?

SNB's decision to remove the 1.20 Peg has surely caused an exceptional situation and opened various questions such as

1. Leverage offerted 2. Risk practices 3.Roles of Broker , liquidity provider 4. Stop loss effective ness etc . .

Also whether it was right or not on SNB's part to push this decision as a surprise to Markets.....

But what happens to the drop in Net value of EUR/other Currencies which SNB holds now due to the "De-pegging" ?

For whole 3 years they have been holding this PEG . So i assume they would have bought huge amount of EUR on or above 1.2 to Keep it from falling below .. over these years .. .. The max it reached was 1.26xx and for most of the Monthly candles seems closer to 1.2 there by indicating intervention from SNB continuously ...

So the question is this .... Now that the value of EUR is down , the net value of all the EUR which SNB Bought is also brought down... So where does SNB go from here to make up this loss of Net value ???.. Do they hope to get the price of 1.2 to dump the holdings some time in future ... if so how soon??

well , understanding this aspect of approach and plan of action by SNB , will provide the necessary clues on how the future market volatility and pricing is going to evolve

As i see it the options they have could be ..
1. Keep the EUR as is and wait the free market to decide and sell 1.2
2. Start buying EUR at lower price now and average out with sells ( Create a huge volatilily based on the time horizon )
3. Have an internal floor of 1. set and maintain it out ( buy only to defend this internal floor)

Interested to hear back opinions of traders here ,,, to utilise this opportunity in our favour to assess the market activity ....

Do you think they unwind the position before announcement? if not they have huge loss in their B/S? they had made a stupid decision I think.

I expect the backlash from Swiss exporters will be huge, so a re-pegging is expected. 1.20 was obviously not sustainable. Could also be a sign that euro will start QE which will be an opportunity for Euro zone to buy assets accumulated by SNB. Continued devaluation of euro expected.

SNB must lower interest rates even more. Other Central banks are crazy. You cannot pretend to be normal in an asylum.

Well said, SNB might even start printing to try and devalue. There is already a lot of pressure in Switzerland as exporters lose orders. This hit Swatch pretty badly, so smaller manufactures with less capital are almost dead in the water with the Franc so high. Swiss stock market dropped around 24% - all that market cap. *poof* - in a heartbeat.

Black swan?

Agreed, stupid decision.

Thats interesting .. so if they want to reverse the decision how hard or easy will it be for them them to do it in public, or rather will they do it with interventions directly in market .. Perhaps the ECB announcement may let them get cheaper EUR .. now that they need not defend 1,2 but have an opportunity to get cheaper EUR and then offset against 1.20 BUY's and turn the current loss into a profit ...... Interesting months ahead for EUR/CHF then ...

WSJ:

"SNB's Jordan said the central bank is prepared to intervene in the FX markets again to weaken the CHF if necessary and added that CHF is greatly overvalued. Elsewhere, Swiss finance minister said she expects EUR/CHF to settle around 1.1000 which would be a level that Switzerland's economy could withstand"

Swiss Franc: the shock wave continues

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