Swiss Franc Takes a Dive Following Surprise Rate Cut by SNB
Swiss Franc Under Pressure
If there was going to be a surprise this week, the SNB was always going to be the one. And they certainly had the courage to do so, taking the first step well before any other major central bank in this latest cycle. Traders were certainly caught wrong-footed, having only priced in such a move for June instead. And so now, the catch-up game begins.
Market Reactions
The Swiss franc has taken a tumble as a result, falling across the board. USD/CHF is up to its highest since November and the break allows for buyers to take aim at the 0.9000 mark next. Meanwhile, EUR/CHF is up to its highest since July as it shakes off the September and November highs in one go. The question now is, do buyers have more fuel to work with?
- Technical Considerations: From a technical perspective, perhaps there is room for some extension. But as we take into account the decline in the franc above, markets have quickly raced to price in further rate cuts by the SNB already.
- Outlook and Risks: The SNB's policy language suggests they are ready to act again in June, potentially leading to a more consistent easing cycle. This could tilt the balance of risks for the franc lower, despite challenges from imported inflation risks that the SNB is keen to manage.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.