Technical Analysis

Swiss National Bank Poised To End Negative-Rate Era On Thursday

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    The Swiss franc has started the week in negative territory. In the North American session, is trading at 0.9674, up 0.31%.


    Swiss National Bank To Continue Tightening

    The Times They Are a Changin.

    This is nowhere more apparent than in Switzerland, where the SNB is poised to end the negative rate era on . The safety of the Swiss franc has allowed the SNB to offer negative rates to investors, who were only too happy to park their funds during times of uncertainty, of which they have been plenty. While the Swissie’s value as a reliable safe haven asset hasn’t changed, what has changed is a world of low inflation, particularly after the Russian invasion of Ukraine.

    Switzerland’s is running at an annual clip of 3.5%, for which many central bankers would give their right arm. Still, inflation is on the rise and has become enough of an issue for the SNB that in June, it raised rates by 0.50%, bringing the benchmark rate to -0.25%. At the time, inflation was at 3.4%, its highest level since 1993. The rate hike hasn’t lowered inflation, which rose to 3.5% in August. The SNB is expected to strike again, with the markets having fully priced in a 75bp increase at the Thursday meeting, with a possibility of a massive full-point hike. Barring a huge surprise, this marks the end of the negative rate era, and I would expect the Swissie to gain ground if the SNB raises rates by 0.75% or 1.00%.

    The Federal Reserve a day earlier, on September 21st, and is also expected to deliver a 0.75% rate increase, with an outside chance of a 1.00% hike. The US economy has been performing fairly well, allowing the Federal Reserve to continue tightening policy as it grapples with high inflation.

    USD/CHF Technical

    USD/CHF is testing resistance at 0.9720. Next, there is resistance at 0.9760
    There is support at 0.9642 and 0.9524

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