The Swiss franc is down sharply on Thursday. USD/CHF is trading at 0.8897 in the European session, up 0.67% on the day.
Swiss National Bank trims rate to 1.25%
The Swiss National Bank kept investors hanging right up to the last minute as to whether or not it would cut rates at Thursday’s meeting. In the end, the SNB opted to cut rates for a second straight time and lowered the cash rate from 1.50% to 1.25%.
There were good reasons for the SNB either to hold or cut, which meant that either decision was likely to shake up the Swiss franc, which is exactly what happened. Inflation remained unchanged at 1.4% in May, in the upper half of the target band of 0% to 2%. Growth has been steady and the SNB could have easily decided to hold rates.
There were other factors at play which swayed policy makers to lower rates, such as the exchange rate. The Swiss franc has been on a tear, climbing 3.3% against the US dollar since late May. The SNB doesn’t want the Swissie to appreciate rapidly as this hurts the export sector, a key engine of the Swiss economy.
Thursday’s rate cut has already pushed the Swiss franc lower and the rate statement noted that the SNB “is willing to be active in the foreign exchange market as necessary”. This was a reminder that the central bank, which has intervened in the foreign exchange markets in the past, won’t hesitate to do so again in order to keep the exchange rate at a desirable level.
The SNB shocked the markets in March when it cut rates, the first major central bank to do so in the era of rate-tightening in order to curb high inflation. This decision was less of a surprise but had the same effect in sending the Swiss franc sharply lower.
USD/CHF technical
USD/CHF has pushed above resistance at 0.8847 and 0.8880 and is putting pressure on resistance at 0.8911.
There is support at 0.8800 and 0.8767.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
EUR/USD retreats from daily highs, holds above 1.0800
EUR/USD loses traction but holds above 1.0800 after touching its highest level in three weeks above 1.0840. Nonfarm Payrolls in the US rose more than expected in June but downward revisions to May and April don't allow the USD to gather strength.
GBP/USD struggles to hold above 1.2800 after US jobs data
GBP/USD spiked above 1.2800 with the immediate reaction to the mixed US jobs report but retreated below this level. Nonfarm Payrolls in the US rose 206,000 in June. The Unemployment Rate ticked up to 4.1% and annual wage inflation declined to 3.9%.
Gold approaches $2,380 on robust NFP data
Gold intensifies the bullish stance for the day, rising to the vicinity of the $2,380 region following the publication of the US labour market report for the month of June. The benchmark 10-year US Treasury bond yield stays deep in the red near 4.3%, helping XAU/USD push higher.
Crypto Today: Bitcoin, Ethereum and Ripple lose key support levels, extend declines on Friday
Crypto market lost nearly 6% in market capitalization, down to $2.121 trillion. Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) erased recent gains from 2024.
French Elections Preview: Euro to “sell the fact” on a hung parliament scenario Premium
Investors expect Frances's second round of parliamentary elections to end with a hung parliament. Keeping extremists out of power is priced in and could result in profit-taking on Euro gains.