Mysterious EUR/CHF Spike Solved

May 24, 2012 2:02 PM EDT
Here is a breakdown of what we are able to piece together regarding the mysterious EUR/CHF spike we saw this morning.

At 8:55 a relatively small order hit the tape, but because liquidity was low, the price of EUR/CHF spiked from 1.2010 to 1.2045, which is a fairly decent size move.

Minutes later a rumor broke that the Swiss government was planning to tax Greek funds held in banks there. The rumors were based on actual reports from Reuters that came out last year that would model the new tax scheme similar to agreements made with Britain and Germany. As the rumor spread, the price of EUR/CHF spiked to near 1.2070.

Around 9:25 am traders began to realized that the rumor was untrue, particularly when DJ issued a statement saying the move was caused by a "small" trade. Since then, the price has settled back down and is trading at 1.2017.

All in all it was a lot-to-do about nothing. If anything, it highlights possible liquidity issues trading this cross and nervousness with a potential Greek exit.

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