Global financial markets have been engaged to the idea of sovereign QE from the European Central Bank for nearly a year. After yesterday's Swiss surprise, they're just about married to it.
What we've seen in markets during the first part of January has been akin to the emotionally charged time frame surrounding a wedding. Yesterday would be the day when your loud, drunk Uncle Thomas (coincidentally, the same first name as the Swiss National Bank President) stood up and made some unintelligible rant. No one expected uncle Thomas to have such an outburst, and it certainly shook the wedding guests. But the show must go on.
Still, guests wonder what had Thomas spooked enough to make such an outburst. Maybe he's knows something they don't know. Some have concluded he thinks the marriage is doomed and wants no part of it. Others have concluded he thinks the marriage will be successful, but that it will cost him a lot of money in some way.
Whatever the case may be, the volatility we're currently seeing in financial markets is part of the courtship process with the notion of European sovereign QE. The consensus has quickly become that the Swiss surprise makes some profound comment on the nature of that QE plan, but no one can quite agree on exactly what that is--much like the wedding guests who aren't sure what Uncle Thomas was getting at, but who know it must mean something. Hence the volatility.
On top of all this, Draghi met with Merkel and pitched a QE plan. The only foolish thing to do at this point when it comes to watching markets would be to assume that we've seen the any sort of peak in volatility. The past two days will probably end up looking tame in hindsight, compared to what's coming up.
102-24 : -0-18
105-07 : -0-11
106-27 : -0-04
0.4710 : +0.0510
1.8220 : +0.0940
2.4510 : +0.0840
|Pricing as of 1/16/15 1:05PMEST|