Swiss franc flounders after surprise rate cut
2024-03-22
Summary:
Sterling hit a 2024 high against the Swiss franc after the SNB's surprise rate hike, marking the first major central bank to ease policy.
Sterling rose to its highest since early July against the Swiss franc on Friday as the SNB surprised with a rate hike at the first meeting in 2024 – the first major central bank to dial back monetary tightening.
Chairman Thomas Jordan decided to lower policy rate by 25 bps before he stepped down in September. That was the first rate cut in 9 years, sending Swiss government bond yields tumbling.
Analysts had expected policymakers to keep rates on hold and wait at least another three months before moving. The SNB now expects inflation to average 1.4% this year and 1.2% next year.
The BOE sit on its hands as expected but signalled the UK economy was moving in the right direction for it to start cutting rates. money markets were pricing a 75% chance of a cut in June after the meeting.
Stubborn inflation in the kingdom has supported the pound this year. The currency has been one of the best performers so far, gaining 1.1% against the euro and 5.5% against the franc respectively.
The S&P Global Composite UK PMI inched down to 52.9 in March from 53.0 in February. The reading contrasted with those of France and Germany, where a continued downturn looms large.
The pound has formed an ascending channel against the franc since a low was hit at the end of last year. Golden cross is also indicating uptrend in the upcoming sessions with potential resistance around 1.1500.
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