USD/CHF: here’s why the Swiss franc crashed after the SNB decision

on Jun 17, 2021
  • The USD/CHF pair popped after the latest SNB and Fed interest rate decision.
  • The two banks left interest rate unchanged as expected.
  • The SNB sounded dovish while the Fed hinted at a possible rate hike in 2023.

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The USD/CHF pair spiked on Thursday after the latest Fed and Swiss National Bank (SNB) interest rate decision. The pair rose to a multi-week high of 0.9133, which was more than 2.3% above the lowest level in June.

Swiss franc
Swiss franc chart

SNB interest rate decision

The SNB concluded its two-day meeting on Thursday morning and did what most analysts were expecting. The bank decided to leave interest rates unchanged at -0.75%, where they have been in the past few months. The bank also committed to intervene in the market when necessary.

Like it has said in the past few months, the SNB insisted that the Swiss franc remained highly valued against key currencies like the US dollar, euro, and sterling. 

Meanwhile, the bank expects that inflation will continue rising later this year because of the strength of the economy, higher commodity prices, and the strong demand for tourism-related products. It expects that inflation will rose by 0.4% and 0.6% in 2021 and 2023. It also expects that the Swiss economy will rise by 3.5% this year. This is in line with the recent SECO estimates on Swiss GDP. The bank said:

“The upward revision is primarily attributable to the lower-than-expected decline in GDP in the first quarter. Swiss GDP is likely to return to its pre-crisis level by the middle of the year. However, production capacity will remain underutilized for some time yet.”

The dovish statement by the SNB came a few hours after the Fed delivered a somewhat hawkish decision. The bank decided to leave interest rates and quantitative easing policies unchanged. Still, for once, the bank hinted that the first rate hike will come in 2023. As such, analysts expect that it will start tapering its asset purchases in the coming months.

USD/CHF technical analysis

USD/CHF technical chart

The four-hour chart shows that the USD/CHF pair popped after the hawkish Fed interest rate decision. By so doing, the pair moved above the important descending trendline that is shown in blue. The 50-day and 25-day exponential moving averages (EMA) have also made a bullish crossover pattern while the MACD has kept rising. Therefore, the pair will likely keep rising as bulls target the next key resistance at 0.9200. However, a drop below the support at 0.9050 will invalidate this trend.