Swiss Market Index (SMI) companies jump after SNB rate decision

The Swiss Market Index (SMI) jumped by more than 1.5% on Thursday after the SNB interest rate decision. The index, which tracks the biggest Swiss companies, surged to a high of CHF 11,316, its highest point since July this year. It has soared by 10% from its lowest level in November.

SNB rate decision

The Swiss Central Bank concluded its meeting on Thursday and did what most analysts were expecting. It left interest rates unchanged at 1.75% for the third straight meeting. 

In a statement, the bank noted that inflation had eased in the past few months as energy prices dropped. Still, with the headline inflation sitting at 1.4%, the bank believes that prices are significantly high.

The SNB vowed to continue monitoring trends in inflation and adjust monetary policy accordingly. It sees inflation rising in the coming months because of higher electricity, rent, and the Value Added Tax (VAT). As such, the bank sees inflation averaging 2.3% in 2023 and 1.9% in 2024.

Economists believe that the SNB will maintain rates at the current level for a few more months and then slash them in 2024. They also see it intervening in the forex market in a bid to devalue the Swiss franc.

The CHF has been highly overvalued against key currencies. For example, the EUR/CHF pair has crashed to its lowest point since 2015 while the USD/CHF has dropped by over 14% from its highest point in December last year.

The SNB decision came a day after the Federal Reserve decided to leave interest rates unchanged between 5.25% and 5.50%. In its statement, the bank hinted that it will deliver about three cuts in 2024.

Fed actions have an impact on Swiss companies since many of them do a lot of business in the United States. Some of them that have a large presence in the US are Logitech, Novartis, and UBS.

All but one Swiss Market Index constituents were in the green after the SNB decision. Sika, the giant chemicals company, rose by over 4% while Richemont, Kuehne & Nagel, Geberit, Alcon, and Partners Group jumped by over 3%. 

Swiss Market Index forecast

SMI chart by TradingView

The daily chart shows that the SMI index continued its uptrend after the SNB decision. It has already moved above the key resistance point at CHF 10,853, the lowest swing on July 10th. 

The 50-day and 100-day Exponential Moving Averages (EMA) are about to form a bullish crossover. Also, the Average Directional Index (ADX) has moved above 30 while the Relative Strength Index (RSI) has risen to the overbought level. 

The ADX is a popular indicator that looks at the strength of a trend. Therefore, the outlook for the index is bullish, with the next point to watch being at CHF 11,617, the highest level in May this year.