The date January 15th is remembered as a significant day in forex trading history, particularly for market participants at that time. The Swiss National Bank (SNB), Switzerland’s central bank, caused a major upheaval in the exchange rate of the Swiss Franc (CHF) against several other major currencies, including the Euro.
On January 15th, 2015, during the early European trading session, the SNB released an official statement on their website outlining their policy for the next 3.25 years.
The statement mentioned that the current market assessment of the Swiss Franc’s value was considered excessively high, which raised concerns about the Swiss economy and the potential risks of deflation.
As a result, the central bank announced its intention to substantially and consistently weaken the Swiss Franc’s exchange rate.
This unexpected move by the SNB led to confusion among market participants, causing the Swiss Franc to significantly strengthen against several major currencies during a time of economic uncertainty. It reached unprecedented levels that had not been seen before.
You might wonder why this event became a “major problem” for the forex market at that time. A senior SNB official provided insight into their decision-making process:
“We have spent the past month formulating our plans, analyzing all available data and parameters. Considering various factors, we strongly believe that the exchange rate should be maintained within a lower range, serving as the foundation for our monetary policy.”
Following the SNB’s announcement, within a span of three days, the EUR/CHF currency pair dropped below the 0.99 level from its previous range around 1.2000, resulting in a significant decline of over 2000 pips within a short period.
Reports indicated that many small brokerage firms closed their forex businesses, and numerous traders experienced stop-outs despite implementing stop-loss features to minimize risks.
However, due to the high volatility in the market during that period and within a relatively short timeframe, these protective features were ineffective.
