The continued decline in oil, the strengthening US Dollar, Central Bank actions (Swiss National Bank, ECB QE), global deflationary fears, the attacks in Paris and Greek elections all weighed on investors at the start of the year; with January being a veritable feast of potential game changing events for investors to digest. A month often referred to as the most depressing month of the year was particularly so for any investors with short positions in the Swiss Franc, as the Swiss National Bank (SNB) took the sudden decision to abolish its defence of the peg against the Euro, imposed in 2011 and establishing a minimum exchange rate of EURCHF 1.20.
The SNB had previously committed to the utmost defence of the cap only a month earlier. This immediately sent the Swiss Franc soaring almost 30%, temporarily freezing FX markets. The move was described as a “20-plus-standard-deviation move” by the CFO of Goldman Sachs – theoretically removing the likelihood of a similar move for at least a billion years. The Swiss economy is heavily export centric and Swiss equities were battered by the move, falling over -14% in the aftermath of the announcement and finishing the month down -6.66%.