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Swiss franc bolts higher as the SNB, BoE join the rate hike party while BoJ dances alone

The Swiss franc found support post SNB bombshell 0.50% hike; equities remain under pressure as risks swirl from central bank actions and with the SNB joining the Fed and BoE this week, will EUR/CHF go lower?

The Swiss franc is higher as the fallout from the Swiss National Bank’s (SNB) unexpected 50 basis point (bp) rate hike continues. The Bank of England (BoE) 25 bp hike has also seen Sterling rally as the US dollar slips.

USD/CHF has put in a double top after hitting the mid-May high of 1.0050 on Wednesday. It has since collapsed below 0.9700 after the SNB’s announcement yesterday.

The SNB has a storied history of unconventional changes to policy. Most famous is the abandoning of capping the rising Franc in 2015 that saw EUR/CHF go from 1.2000 to 0.8600 at a blistering pace. It then recovered back above parity, where it has mostly been ever since.

The BoE was more straight up, delivering on the telegraphed 25 bp rate rise. GBP/USD is only slightly softer through the Asian session.

While the US dollar is generally under pressure elsewhere, USD/JPY galloped north after the Bank of Japan left monetary policy unchanged. Next Thursday’s inflation data there will be closely watched.

A deeply negative Wall Street cash session has seen futures recover somewhat after hours. Australian and Japanese equities had a down day, but Hong Kong and mainland Chinese markets gained some ground.

Industrial metals are weaker while gold is fairly steady near US$ 1,842 an ounce. Crude oil is a tad weaker with the WTI futures contract below US$ 117 bbl and the Brent contract near US$ 119 bbl.

Looking ahead, after Eurozone CPI, Canada and the US will see industrial production figures.

EUR/CHF technical analysis

In the wake of the SNB’s rate hike, EUR/CHF collapsed below an ascending trend line to fall back inside a broad 4-month range of 0.9973 – 1.0515.

The move down bounced off a break point at 1.0132 and closed above a previous low of 1.0189 and these levels might provide support.

A double top was put in place last week when the price was unable to break above last month’s peak of 1.0515.

On the topside, resistance could be the simple moving average (SMA) or the previous highs of 1.0478 and 1.0515.

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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