Swiss National Bank (SNB) hikes rates by 25 pbs to 1.75% as expected. USD/CHF bounced at 0.89

For the full Monetary policy assessment released by the SNB click here

The Swiss National Bank (SNB) has tightened its monetary policy by increasing the SNB policy rate by 0.25 percentage points to 1.75%. The move is aimed at addressing rising inflationary pressure. Additional rate hikes may be necessary in the future to ensure price stability. The SNB is also prepared to intervene in the foreign exchange market by selling foreign currency as needed.

Inflation has decreased significantly in recent months, mainly due to lower prices for imported goods like oil and natural gas. The SNB’s new inflation forecast, assuming a 1.75% policy rate, indicates lower inflation for 2023 compared to March. However, starting from 2024, inflation is expected to be higher due to ongoing effects, electricity price increases, rents, and inflationary pressure from abroad. Average annual inflation is projected at 2.2% for 2023 and 2024, and 2.1% for 2025.

USD/CHF found support near 0.89, avoiding to traded below last week lows, and rebounded but is not clear if there is a set up for a rally since daily SMA at 21 and EMA at 55 failed a crossover and are both pending negative. A bullish set up would have more probabilities in case of higher lows from April 2023 lows confirmed. In case of selling pressure beneath 0.89 the pair will likely test again area 0.8820.