If there was going to be a surprise this week, the SNB was always going to be the one. And they certainly had the courage to do so, taking the first step well before any other major central bank in this latest cycle. Traders were certainly caught wrong-footed, having only priced in such a move for June instead. And so now, the catch up game begins. The Swiss franc has taken a tumble as a result, falling across the board.
USD/CHF daily chart
EUR/CHF daily chart
USD/CHF is up to its highest since November and the break allows for buyers to take aim at the 0.9000 mark next. Meanwhile, EUR/CHF is up to its highest since July as it shakes off the September and November highs in one go. The question now is, do buyers have more fuel to work with?
From a technical perspective, perhaps there is room for some extension. But as we take into account the decline in the franc above, markets have quickly raced to price in further rate cuts by the SNB already. After all, the policy language certainly does look like they are ready to act again in June.
Considering the fact that the Fed and ECB may not be able to go with back-to-back rate cuts even if they kick things off in June, a more consistent easing cycle means that the balance of risks for the franc is now tilted lower instead. However, just be mindful that the SNB may not allow for that too much as they have been adamant in fending off the risks of imported inflation over the last one year.