SNB Cuts Again

The Swiss Franc was heavily sold on Thursday following a larger than expected rate cut from the SNB. The central bank cut rates by a deeper .5% on the back of the continued easing in inflation readings recently. The latest Swiss CPI data saw inflation cooling to 0.7% from the prior 1.1%, well below expectations. With rates now back at levels not seen since 2022 and forecast to ease further, CHF looks vulnerable to further downside near-term. Along with the rate cut the SNB also revised its 2025 inflation forecasts, endorsing expectations for further easing early next year.

Fed Expectations

For USDCHF, the key now will be how the Fed acts this month. A .25% rate cut is well signalled but given the strength we’re seeing in USD, its clear the market is expecting a less dovish message from the Fed. Recent strength in labour market data and the continued uptick in inflation suggests a less pressing need to ease beyond an expected further .25% this month. If the Fed’s outlook and guidance this month errs on the hawkish side, refraining from signalling a follow-up rate-cut near-term, USD is likely to continue higher into early next year.

Technical Views

USDCHF

The rally in the Swissy has seen the pair moving back above the .8845 level. This is a key near-term pivot for the market and while above here focus is on a continuation higher towards a test of the .9052 level in line with rising momentum studies readings.