FX Market Opens, EUR Hammered, CHF Bid; S&P To Open -30pts

Tyler Durden's picture

As Citi's Steven Englander suggested earlier, the developments in Cyprus will lead to EUR selling and USD, CHF, GBP, NOK and SEK  buying (in that order). He adds, the issue is whether to believe that the Cyprus levy on depositors is one-off, but depositors and investors elsewhere could easily see this as another in a string of ‘one-offs’ and react badly. The risk-return to depositors in countries with weak banking systems may not favor taking the risk that Cypriot banking system was so unique that such a levy would never be considered elsewhere. The levy on deposits ostensibly covered by deposit insurance may also undermine confidence in weak banks. The question is whether this becomes a full-blown crisis or a mini-crisis. For now, as FX markets open, it appears EURJPY is getting hammered (from 124.47 close to 121.6) implying S&P futures will open down around 30 points. We are sure Abe is watching closely...

 

 

Given the element of surprise, it is probably the case that euro zone policymakers will not have concrete measures prepared to convince depositors elsewhere that this will never happen again. So it seems likely in the first instance some resurgence of tail risk will re-appear and that there is a risk that we could see a downward spike in the euro and significant backing up of spreads.

 

EURUSD has opened and is -140 pips for now...

 

and CHF is bid...

 

and all that good jawboning by Carney gone dow the drain... as GBP bid too...

 

the question is will the Swissie bid on Europe's risk flare recouple the S&P 500 with reality once again... as it did after theItalian election...

 

and of course everyone's favorite USDJPY...

 

Leaving us asking 'Is This It?' as a terrible case of deja vu comes over the market once again...

 

or this?

 

or perhaps more appropriately this?

 

Charts: Bloomberg