10 Thoughts After the SNB

A new set of Premium trades is due out shortly ahead of the Friday Asia session.

1. The immediate focus turns to the ECB. The SNB certainly seems to believe that sovereign QE is coming and comments from Coeure late in the day were another hint. Even without the ECB, the SNB has quit buying and that's a negative for the euro.

2. The Swiss economy is about to be hit by a major shock and a disinflationary problem just became a disinflationary crisis. Exporters are uncompetitive overnight.

3. There is chatter about the SNB selling or altering the composition of its roughly CHF500 billion of reserves. Gold is a possibility and that may have played a small part of the $30 rally on Thursday.

4. Everyone is staying away from EUR/CHF now and analysts are even scared to guess what's next. The takeaway is that no one has strong opinions so momentum trades are likely to dominate.

5. The BOJ is slowly shifting its position on inflation targets and backing away from them. The move away takes the threat of action off the table and officials have even been talking up the yen. Technically, the Dec low of 115.57 is key.

6. With yields collapsing everywhere the high-yielders look better all the time. Stocks have fallen for 5 straight days yet the Australian dollar has been inching higher. The 2.50% yield Down Under is more enticing every day.

7. Many brokers took a hit on the news and at least one was forced to close up. For us, it's not so much a broker story but a liquidity story. It will ultimately mean less money, tighter margins and a more volatile market. It urges for top-notch risk controls.

8. The eurodollar market is slowly losing its love for Fed rate hikes. The Philly Fed was poor at 6.3 vs 18.7 exp and inflation is gone after the oil market made another failed attempt at a rebound. There is more and more talk about the Fed never getting above 1.00% but traders are still asking the question: If not the US dollar, then what?

9. Buried in the news was that retail giant Target is leaving Canada after entering 2 years ago. It helped to snuff out a USD/CAD slide. Investment isn't coming to retail/consumers, it's definitely not coming to commodities and housing is teetering. The next central bank surprise could be a BOC hint at cuts.

10.  IMF Managing Director Lagarde was asked about the SNB move today and said she was surprised not to be warned in advance. Jordan declined to comment on if other central banks were informed. We're troubled at the idea that central bankers would or should inform cohorts or that it's standard practice. It opens far too many avenues for leaks and abuse.