Rates as of 0500 GMT

Market Recap

Currencies yesterday moved largely on interest rate changes.

Sharpeyed viewers may notice that CHF isnt included in the above charts. Thats because CHF was the outlier yesterday including it significantly lowers the Rsquared the goodness of fit measurement.

It appears that CHF was following risk sentiment as reflected in the Swiss Market Index SMI or perhaps the SMI was following CHF? That might make more sense as the value of foreign earnings to Swiss companies would be going down, and therefore the value of Swiss companies would be going down, as the value of the Swiss franc increased.

USDCHF wasnt following the SP 500, at least not that closely.

The poor performance of the SP 500 was blamed on the disappointing US Conference Board consumer confidence figure, which fell more than expected. The fall in the expectations index was particularly sad.

In short, we cant determine exactly why CHF was the outlier. There wasnt any particular news out of Switzerland. It couldve been due to supernatural forces operating in the FX market i.e., Swiss National Bank SNB intervention.

My assumption is that it was a further reassessment of the outlook for Swiss monetary policy. As various European Central Bank ECB members talk more about tightening and tightening, the prospect increases that the SNB will have to tighten even more aggressively in order to prevent CHF from weakening vs EUR.

Yesterday at the ECBs symposium in Sintra,…