Last week, the Swiss National Bank shocked markets by announcing that it would abandon its currency peg of 1.2 Swiss francs to 1 euro.
In a weekly strategy report on Tuesday, however, Oppenheimer’s John Stoltzfus writes that while the SNB’s decision was a shock, it would not be the last surprise investors face in the market.
“We believe the SNB’s action last week will ultimately be seen in the rearview mirror of market history as simply part of a process that came ahead of the launch of ‘QE ECB style,'” Stoltzfus writes. “For now, we believe investors should remain focused on their goals and objectives, not losing sight of them even as more surprises likely lie ahead.”
The market is still digesting both the implications of the SNB’s decision and the reasoning behind it.
On Monday, Business Insider’s Tomas Hirst took a look at what may have been motivating the SNB’s decision, namely that as the euro has weakened ahead of an anticipated quantitative easing bond-buying program, the SNB’s peg became more and more expensive to defend.
Stoltzfus adds that the market seems to be taking the SNB’s decision as “increasing the likelihood” that the ECB will announce a QE program at its policy meeting on Thursday, a program Stoltzfus writes “could well lead to a positive outcome and a sustainable economic recovery in the eurozone parallel to that of the US’s process of recovery into expansion.”
And so as tends to happen in markets, the primary focus has already moved away from the SNB and toward the ECB meeting this week — or whatever surprises the future holds.