SNB cuts key policy rate by 25 bps to 1.25% from 1.50% previously

• Prior 1.50%
• Ready to intervene in FX market if needed and as necessary
• A renewed increase in geopolitical tensions could result in weaker global activity
• Able to maintain appropriate monetary conditions as such
• Will adjust monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium-term
• Inflation in Switzerland is currently being driven above all by higher prices for domestic services
• Sees 2024 inflation at 1.3% (previously 1.4%)
• Sees 2025 inflation at 1.1% (previously 1.2%)
• Sees 2026 inflation at 1.0% (previously 1.1%)
• Full statement

It fits with market expectations but the franc has weakened on the decision here. As mentioned before, the call to cut rates today is closer to a coin flip. And the SNB decides that it will continue down this path, at least for today. USD/CHF is now up 0.5% to 0.8885 on the day.

Adding to the rate cut, the SNB also marginally lowered its inflation projections. And that is also contributing to the softer franc in response to the decision.

All that being said, I’d still argue that the move would be to fade weakness in the franc in relation to this. The threshold for USD/CHF is the 200-day moving average at 0.8895 now. Hold below that and sellers will still maintain some form of downside conviction in the pair.

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