SNB Cuts by .25%

The Swiss Franc failed to break lower today on the back of the latest rate reduction from the SNB. The Swiss bank cut rates by a further .25%, taking the headline rate down to just 1%. However, on the back of the Fed’s more aggressive .5% cut, it seems traders were left underwhelmed by the adjustment, perhaps looking for the bank to follow in the Fed’s footsteps with a larger cut. Along with the smaller .25% cut, the tone of the meeting statement was seen as less dovish than many were expecting.

Strong Franc

Against the backdrop of a strong Swiss Franc, traders were looking for a more definite tone on further rate cuts. However, looking ahead, outgoing SNB chief Jordan simply signalled that further rate cuts “may become necessary.” On the back of the meeting, the market is pricing in one further rate cut in December of .25%. However, if we see the Swiss Franc moving higher in coming months, this outlook could switch in favour of a larger .5% cut. Near-term, the CHF looks vulnerable to further strength against USD, particularly if incoming US data highlights further weakness, bolstering expectations for a further Fed rate cut in November.

Technical Views

USDCHF

For now, the Swissy remains stuck in a tight range between .8377 - .8551, sat at the foot of the recent declines. Momentum studies have turned positive, suggesting room for a correction higher, targeting a test of the bear trend line and .8845, while a break down through lows will encourage fresh downside momentum.