The Swiss franc has tumbled on Thursday after the Swiss National Bank lowered interest rates. In the North American session, USD/CHF is trading at 0.8987, up 1.35% on the day. Earlier, the Swiss franc fell as low as 0.8994, its lowest level since November 23.

SNB surprises with 0.25% rate cut

There has been plenty of speculation as to when the Fed and other major central banks will lower interest rates, but in the end the Swiss National Bank that took the plunge first, with a quarter-point cut on Thursday. The move was a surprise as investors hadn’t expected the SNB to cut rates until June at the earliest.

The SNB lowered the cash rate from 1.75% to 1.50%, sending the Swiss franc sharply lower. SNB President Thomas Jordan said after the meeting that the rate cut was in response to an “effective” battle against inflation. Inflation has been falling and is currently at 1.2%.

The central bank also revised lower its inflation forecast to 1.4% in 2024 and 1.2% in 2025. The SNB also noted that the appreciation of the Swiss franc had dampened growth. We could add that the strong Swiss franc has also dampened inflation and allowed the SNB to shift policy and start lowering rates.

Federal Reserve holds rates, remains cautious

The Federal Reserve held the benchmark rate at a target range of 5% to 5.25% on Wednesday, as was widely expected. The Fed maintained its projection of three rate cuts this year and revised its GDP forecast for 2024 to 2.1%, up from 1.4% in December.

Fed Chair Powell noted that inflation was falling and the US economy was strong, but cautioned that the Fed would not start to cut rates until it was clear that inflation was moving sustainably towards the 2% target. The markets have priced in an initial rate cut for June, with a probability of around 75%.

USD/CHF Technical

• USD/CHF has pushed above 0.8918 and tested resistance at 0.8982 earlier. Above, there is resistance at 0.9095
• 0.8876 and 0.8812 are providing support

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