Black Thursday in Forex
Black Thursday in forex, is an unforgettable financial shock that struck the Forex market on January 15, 2015, leaving a lasting impact on global currency trading. This day is also known as the Swiss Franc Shock, when the Swiss National Bank suddenly ended its three-year policy of pegging the Swiss Franc to the Euro at CHF 1.20, stunning the Forex market without any prior warning. Traders and regular individuals who relied on stable exchange rates felt as if the earth beneath them had moved. This unexpected action caused the franc to skyrocket, marking a watershed moment in the modern world economy. People worried as markets shook, and the SNB's move sparked chaos and altered perceptions of currency stability. It was a wake-up call for investors around the world, proving how quickly fortunes can change. Its ripple effects touched lives beyond Switzerland, opening a new chapter in which trust in central bank action was tested. For many, the day was a stark reminder of the unpredictable heartbeat of global finance, forever etched in memory as a day of shock and adjustment.
After this announcement, the Swiss franc's value skyrocketed, followed by one of the most significant swings in the currency market in recent memory. Swiss banks are known around the globe as the safest places to hold money, and the Swiss franc, along with the Japanese yen, is regarded as one of the safest foreign currencies; the Swiss National Bank (SNB) plays a key role in this regard and has a substantial impact on the franc's value. After the euro crisis in 2011, the Swiss National Bank decided to keep the currency's exchange rate fixed at around 1.2 francs per euro, but on January 15, it unexpectedly decided to cancel it, causing the franc's value to rise by about 30-40% against the euro in thirty minutes, to 0.805 Swiss francs per euro. In fact, this decision was made without prior notice, and as is well known, many forex traders experienced significant losses as a result of the strong market volatility on this day. These variations drained the market's liquidity and produced uncontrollable price increases. This led to several Forex brokers, such as Alpari UK, declaring bankruptcy, and consequently, retail traders in the market suffered huge losses, losing all or most of their accounts.
On the other side, the country's tourism industry was also affected. it generated a significant economic shock and market confusion as winter travel, which was primarily for skiing and its attractions, became much more expensive for international tourists. Other franc-priced sectors, such as hotels and restaurants, have become less competitive in comparison to neighboring countries like France, Austria, and Italy. As a result, tourists picked alternate places with better exchange rates or reduced their stays, while Swiss citizens found overseas travel more inexpensive and travelled abroad more frequently; Resulting this incident and the industry's difficult winter in 2015, the Swiss Tourism Organization changed its strategy and began marketing to tourists from less affected countries, such as the United States, China, India, and the Middle East, as well as emphasizing luxury, unique experiences, such as glacier trains, spa resorts, and first-class mountain lodges, in order to attract more wealthy people from the aforementioned countries.
Black Thursday in forex also affected the Swiss watch industry, experiencing a decline in exports, profitability, and global competitiveness. As expected, luxury brands & companies overcame this crisis successfully. After that, the watch industry relied on new pricing strategies and high-value niches to maintain its global image and profitability.
This tragedy also had a severe impact on the Swiss watch industry, resulting in the companies’ profitability, export reductions, and global competitiveness. Despite the challenges, luxury brands and companies demonstrated remarkable endurance in dealing with the crisis. As expected, following this phase, the industry adjusted its approach by introducing new & innovative pricing strategies and targeting high-value niches. In addition to guaranteeing long-term profitability and recovering its prestigious international reputation, these initiatives demonstrated the industry's capacity for adaptation and success in the face of hardship.
Finally, the Black Thursday came along with a robust reaction from the Swiss stock market. The Swiss Market Index “SMI” dropped over 9%, which was the worst result since 1989 for the Swiss primary stock market index. The decline was largely due to the drop in the value of shares of large and key companies that earned a large part of their income from exports. Significant volatility was caused by this shock, which demonstrated the strength currencies get from the central bank's decisions, especially in nations that prioritize exports
However, according to current data, the event resulted in losses of almost 50 billion Swiss francs (CHF), a 2.6% drop in Swiss exports, and a hit to the country's major industries, notably watchmaking and tourism. On the Swiss stock market, big corporations such as Swatch saw their share prices fall by 14-15%, resulting in a market value loss of approximately 105 billion Swiss francs. On the other side, FXCM, one of the largest online platforms and prominent forex brokers, suffered a significant financial loss, losing $225 million in client cash, prompting its parent company, Global Broking Inc., to declare bankruptcy a few months later. After this event, the Swiss National Bank (SNB) quickly cut interest rates to 0.75% to prevent further losses.
