Swiss National Bank cuts by half-point, Swissy dips

The Swiss franc is down on Thursday following the Swiss National Bank rate announcement. In the North American session, USD/CHF is trading at 0.8880, up 0.43% 80on the day at the time of writing.

Swiss National Bank chops by 50 basis points

Today’s Swiss National Bank meeting was live, with the market uncertain as whether the SNB would cut rates by 25 or 50 basis points. In the end, the central bank opted for a jumbo 50-bp cut, bringing the cash rate to 0.50%.

The driver for the today’s oversized cut was the November inflation report, which came in at -0.1% for a second straight month. Inflation hasn’t posted a gain in six months and the SNB is concerned that inflation could fall below the 0%-2% target.

The 50-bp cut marks the SNB’s biggest rate reduction in 10 years. In its statement, the Bank pointed to lower-than-expected inflation, risks over US economic policy and political uncertainty in Europe. The statement was somewhat dovish, noting that “the forecast for Switzerland, as for the global economy, is subject to significant uncertainty”.

Today’s rate cut marks the fourth reduction this year. The SNB has been aggressive in its easing cycle, with the twin goals of avoiding deflation and combating the Swiss franc’s appreciation. The SNB does not want a highly-valued Swiss franc as this hurts the critical export sector. The central bank implemented a negative rate policy until mid-2022 and the SNB has not ruled out a return to negative rates. After the meeting, SNB President Martin Schlegel said that today’s 50-bp cut had reduced the probability of negative rates.

The SNB also released its updated inflation forecast at today’s meeting. The September inflation report was revised downwards, with a forecast of 1.1% in 2024 and 0.3% in 2025.

USD/CHF Technical

• USD/CHF has pushed above resistance at 0.8860 and is testing resistance at 0.8879. Above, there is resistance at 0.8903
• 0.8836 and 0.8817 are the next support levels

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