The franc benefits from the rapid monetary tightening of the SNB
The price of USD/CHF has been under pressure since mid-June following the unexpected rate hike by the Swiss National Bank (SNB). Some analysts were expecting the SNB’s first rate hike of 25 basis points in June, most in September, but the central bank decided to act more quickly and significantly to slow inflation by raising rates by 50 basis points two weeks ago.
The SNB said it was ready to tighten its monetary policy a little more, which should be the case at its next meeting in September given that inflation should continue to accelerate in Europe in the coming months.
The next data on inflation in Europe, and particularly in Switzerland, will be crucial for the franc. More persistent inflation than expected in Europe would strengthen expectations of monetary tightening, which should support the franc and vice versa.
USD/CHF could also benefit from a more hawkish tone than expected from the ECB at its next meeting in July, but the Eurozone inflation figures released on Friday are likely to be decisive. Higher-than-expected inflation could push the ECB to also raise its rates by 50 basis points, whereas expectations are currently at 25 basis points.
USD/CHF daily price chart – key levels