ForexLive European FX news wrap: Swiss franc falls as SNB surprises with rate cut

SNB:

• SNB cuts key policy rate by 25 bps to 1.50% from 1.75% previously
• Swiss franc tumbles after SNB surprises with a rate cut today
• SNB chairman Thomas Jordan says rate cut is not a parting gift

Headlines:

• Treasury yields retreat further post-Fed but nears key technical juncture
• Gold still on cloud nine ahead of European morning trade
• France March flash services PMI 47.8 vs 48.7 expected
• Germany March flash manufacturing PMI 41.6 vs 43.1 expected
• Eurozone January current account balance €39.4 billion vs €31.9 billion prior
• UK March flash services PMI 53.4 vs 53.8 expected

Markets:

• AUD leads, CHF lags on the day
• European equities higher; S&P 500 futures up 0.4%
• US 10-year yields down 3.8 bps to 4.233%
• Gold up 0.9% to $22,06.43
• WTI crude down 0.3% to $80.50
• Bitcoin up 0.1% at $67,170

As the window of opportunity is opening up for central banks to cut rates, the SNB is not waiting around to make its move. The Swiss central bank surprised with a 25 bps rate cut today and the franc fell as a result. We all knew that there was a chance that they could have surprised markets, but traders were caught wrongfooted after having priced in the first move for June instead.

EUR/CHF rose to its highest since July last year from 0.9680 to 0.9780, before easing back to 0.9740 now. Meanwhile, USD/CHF surged up to its highest levels for the year at 0.8975 before retreating to 0.8930 – still up 0.7% on the day.

Besides that, euro area PMI data saw some mixed readings for March. The manufacturing sector remains in recession but a stronger services sector is at least helping to stabilise the economy in general. The euro slipped with EUR/USD falling from 1.0920 to 1.0888 before sticking around 1.0900 with large option expiries also helping out.

As for the dollar itself, there was some post-Fed weakness during Asia trading. But that has dissipated somewhat in European morning trade so far, despite lower Treasury yields. USD/JPY was as low as 150.26 in Asia but has rebounded back to 151.10 now, down just 0.1% on the day.

In the equities space, stocks remain buoyed as European indices are sitting higher for the most part. US futures are also gaining further after the record closes in Wall Street yesterday.

And in the commodities space, gold continues to hold at fresh record highs above $2,200 as it consolidated gains above the figure level during the session.

This article was written by Justin Low at www.forexlive.com.