The City roundup video: Swiss cause earthquake in markets

Video: Jim Armitage provides a run-down of the day's major news from the City

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Well, it’s been a wild day in the markets today thanks to those ever-inscrutible Swiss central bankers. Neutral Switzerland stuck a bomb under global currencies by declaring it would no longer cap the exchange rate between the Swiss franc and the euro.

What does that mean? Well, three years ago, with the Eurozone debt crisis in full flow, investors took their money out of the euro and piled into the safe haven of the swiss franc. The “swissie” as it’s known, shot up so far that it was making Swiss exports unaffordable for foreigners and jeopardising local jobs and businesses.

So the Swiss central bank said: right, we’ll stop our francs going above 1.20 to the euro. They did this by buying billions of euros with Swiss francs every time it got up to that level.

That’s been going on for three years. But the demand to ditch the euro and get into the Swiss currency has been rising so much that the capped level has become increasingly hard for the Swiss to maintain.

Today, they gave up and decided to let the cap go. In seconds, investors rushed to exchange billions upon billions of euros into Swiss francs in what was described as a tsunami of cash.

The Swiss franc shot up 30 percent against the euro within seconds. Other currencies like the pound were swept along with the stampede. The pound weakened 13% against the Swiss currency. The banking world even had a new word for it: Francageddon.

Why does it matter to us? Because these levels of panic actions by investors show more clearly than ever how critical the state of the Eurozone economy is. Little surprise that the pound surged to new seven years against the single currency.

So that’s good news for holidaymakers, unless you’d planned to head to Switzerland, that is. It’s a safe bet that those hitting the slopes in Verbier and Klosters this year will be doing a lot less après ski.