Price AnalysisTrading Signals

Should You Buy Swiss Franc After SNB’s 50bp Hike?

  • SNB introduced a 50 basis point rate increase.
  • The Swiss franc sees advances across the Forex dashboard.
  • Inflation remains a concern in Switzerland.

Though the trading week is yet to close, financial market players might admit this is the most-fascinating trading week in several years. Leading central banks seems to have synchronized their actions towards tighter monetary conditions worldwide.

It might be challenging to trust that this week’s happenings are concurrency. Furthermore, the previous IMF meetings warmed investors and traders. It has all seemed like unspoken coordination since then.

Meanwhile, the ECB, the RBA, and the Fed resorted to surprise financial actions this week. And the Swiss National Bank mimicked the moves today. Meanwhile, commentary often matters most as far as central banks are concerned. Leading banks are signaling to the market that the era of easy cash has gone, with higher rates becoming the new normal.

SNB Raises Rate to Curb Inflationary Pressures

Meanwhile, the Swiss National Bank tightened monetary measures to curb inflation, like other banks globally. Nevertheless, SNB remains in a comfy spot. Comparing Switzerland’s inflation rate with the U.S and Eurozone reveals a massive disconnect. Thus, we might conclude that SNB is proactive, knowing that financial policy actions come in intervals.

Switzerland’s inflation stands at 2.9% ‘only,’ well below the U.S and the Eurozone. Nevertheless, the SNA revealed its readiness to hike rates further. Moreover, it’s prepared to mediate in the forex market whenever necessary.

A weak currency remains undesirable amid a surging inflation atmosphere. That appears ironic since the Swiss National Banks had challenges weakening its currency, arguing about overvaluation. Meanwhile, Switzerland’s inflation remains lower due to the strong franc.

Surprisingly, the swift uptick in the franc after the SNB’s statement catalyzed similar moves in the JPY. Meanwhile, traders bet similar actions during tomorrow’s BOJ meeting, adding to the bank’s synchronization this week.

Swiss Franc Gains Against U.S Dollar

Meanwhile, the Swiss franc saw an uptick across the Forex space. Even the USD-CHF saw a massive decline. However, market players should act with care when chasing the move. First and foremost, USD-CHF’s rejection emerges at a parity zone.

Parity means a psychological area for market players. Moreover, this’s the 2nd time parity rejection emerged, suggesting an impending ascending triangle. Only a decline under 0.96 would welcome bears in the marketplace.

Also, the exchange rate shifts according to the decision by the central bank. Though SNB hiked rates by 50 basis points today, the policy rate remains in the negative region, -0.25%. On the other side, the federal funds rate stands at 1.76. Therefore, the rate differences favor the United States dollar but not the franc.

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