EUR/CHF tests resistance after SNB hikes rates by 75 bps

22 sept. 2022

It has been a busy day for central banks, with the likes of BoJ, BoE, SNB and CBRT all making headlines with their decisions today.

• The USD/JPY surged to 145.90 on the back of inaction by the Bank of Japan, before plunging to as low as 140.70 as news broke that the Japanese government had intervened to stem the drop in the yen.
  
  
• The GBP/USD slipped back below 1.13 handle after the BoE hiked rates by 50 basis points instead of 75 bps as some had hoped.
  
  
• The USD/TRY hit a new record high above 18.40 after the CBRT cut its one-week repo rate by 100 basis points to 12%, citing loss of momentum in economic activity.
  

With all the above moves and headlines, you might have missed the 2% fall in Swiss franc against the euro, in the aftermath of a 75 basis point rate hike by the SNB earlier today.

The SNB said: "It cannot be ruled out that further increases in the SNB policy rate will be necessary to ensure price stability over the medium term. To provide appropriate monetary conditions, the SNB is also willing to be active in the foreign exchange market as necessary."

"Cannot be ruled out" is not the same as "more rate hikes are likely." So the market interpreted the SNB's rate statement as an indication that future hikes might be limited.

But with the Bank raising its inflation projection for this year to 3.0% from 2.8%, and increased the outlook for 2023 to 2.4% from 1.9% and that for 2024 to 1.7% from 1.6%, you have to wonder that will be the case.

So, I will not be surprised if the EUR/CHF resumed lower from here, as it tests its resistance trend of the bearish channel around the 0.97 handle.

By Fawad Razaqzada on behalf of FOREX.com