Important Bullish Break in USD/CHF After SNB Holds Rates Steady

Yesterday we had two major central bank meetings, the Swiss National Bank (SNB) and the Bank of England (BOE), which were expected to raise interest rates by 25 basis points (bps). But they both opted to leave interest rates on hold, which resulted in two major surprises. Following each decision, the Swiss CHF and the British GBP declined because markets had anticipated that both central banks would have raised interest rates at least once more, which might still come but it gets increasingly less likely as the economies in Europe head into a recession.

Following the SNB announcement, USD/CHF surged from 0.8990 to 0.9075 before retreating lower. So, this was a decisive bullish move for this pair, pushing the price above the major level of 0.90 and the 200 SMA (purple) on the daily chart.

The Swiss National Bank (SNB) believed they could afford to take a further step back because inflation wasn’t as severe there as it was elsewhere, so I assume it wasn’t meant to be a one-and-done case for the SNB, following the FED and ECB which had already decided to halt. We decided to buy the retreat closer to 0.90 in this pair yesterday in the US session and will continue to buy pullbacks, with the US economy at a better position and the FED less dovish/more hawkish than the SNB.

Swiss Nation Bank Monetary Policy for September 2023

• SNB leaves policy rate unchanged at 1.75% vs 2.00% expected
• Prior rates were 1.75%
• Significant tightening of policy in recent quarters is countering remaining inflationary pressure
• It cannot be ruled out that further tightening may become necessary
• SNB will monitor inflation developments closely in the coming months
• Will remain active in the foreign exchange market as necessary
• SNB Sees 2023 CPI inflation at 2.2% (unchanged)
• SNB Sees 2024 CPI inflation at 2.2% (unchanged)
• SNB Sees 2025 CPI inflation at 1.9%
• Full statement

Remarks by SNB chairman, Thomas Jordan

• Inflation battle is not over
• Given “comfortable” level of Swiss inflation, the best solution is to wait and see
• Have to see what happens over the next 3 months
• Clear focus is on price stability
• We are not reacting to weakening in the economy, but to lower inflation

I guess if any central bank has a case to make for pausing, it would be the SNB as depicted in this chart.

USD/CHF Live Chart