USD/CHF Rises on Back-to-Back SNB Rate Cut

  • USDCHF
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USD/CHF Analysis

The Swiss National Bank pivoted in March, as it lowered interest rates for the first time in nine years, ending the tightening cycle that started in 2022. The central bank stays at the forefront of monetary easing, since today it delivered its second straight cut, bringing rates to 1.25%. [1]

Policymakers lowered their inflation forecasts to 1.3% for 2024 and 1.1% for 2025, which probably leaves room for further reductions. Officials kept the door open to such moves, reiterating that they will "adjust" monetary policy "if necessary" to ensure price stability.

The Fed on the other hand, is reluctant to pivot due to persistent inflation, robust labor market and strong economy. Earlier this month, officials raised their inflation forecasts and lowered their rate expectations, seeing just one cut this year. [2]

USD/CHF reacted higher to today's SNB decision and the monetary policy divergence can drive further upside. The pair has the chance to return above the EMA200 that would give control back to the bulls and allow them to challenge the 2024 highs, set in the aftermath of the first cut (0.9225-46).

On the other hand, with two cuts already behind in place, Swiss officials may become less bold. Furthermore, the Fed is cautious, but markets are more optimistic, expecting two cuts starting in September. USD/CHF runs its second straight losing month and below the EMA200, bias is on the downside. As such, the pair is still vulnerable to 0.87300, although sustained weakness is hard given the policy divergence.

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Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 20 Jun 2024 https://www.snb.ch/en/publications/communication/press-releases-restricted/pre_20240620

2

Retrieved 19 Jul 2024 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20240612.htm

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