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Swiss National Bank's Unexpected Rate Hike Lifts Franc

swissfranc jun13 16jun22 lt

The Swiss franc surged against its major counterparts in the European session on Thursday, after the Swiss National Bank raised its key interest rate unexpectedly and signalled more moves in the foreseeable future to counter inflationary pressures.

The bank raised the policy rate and the interest rate on sight deposits at the SNB by half a percentage point to -0.25 percent from -0.75 percent.

"It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future to stabilise inflation in the range consistent with price stability over the medium term," the bank said in the statement.

The bank said it is willing to be active in the foreign exchange market as necessary.

The SNB raised its inflation forecast citing global factors. The inflation projection for this year was raised to 2.8 percent from 2.1 percent. Similarly, the forecast for 2023 was lifted to 1.9 percent from 0.9 percent.

The franc showed mixed trading against its major rivals in the Asian session. While it rose against the yen, it held steady against the euro and the pound. Versus the greenback, it dropped.

The franc gained 2 percent against the euro, hitting nearly a 2-month high of 1.0167. The franc had ended yesterday's trading session at 1.0376 against the euro. The franc is seen finding resistance around the 0.995 level.

The franc added 1.5 percent to touch a 6-day high of 0.9783 against the greenback. The pair had finished Wednesday's deals at 0.9936. Next key resistance for the franc is seen around the 0.95 region.

The Swiss franc was up by 2.4 percent against the pound, reaching a 1-1/2-year high of 1.1802. At Wednesday's close, the pair was worth 1.2088. The franc is likely to challenge resistance around the 1.16 level.

The CHF/JPY pair rose 2 percent to a 1-week high of 137.20. It was valued at 134.45 at yesterday's close. If the currency rises further, 138.00 is possibly seen as its next upside target level.

Looking ahead, the Bank of England's monetary policy announcement is due at 7:00 am ET. The BoE is widely expected to raise its key rate by 25 basis points to 1.25 percent from 1 percent.

Canada wholesale sales for April, U.S. weekly jobless claims for the week ended June 11 and building permits and housing starts for May will be featured in the New York session.

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