The Swiss National Bank (SNB) Policy rate is due to be released on 22nd June at 11:30 AM GMT+4 (Dubai time). The market expects an interest rate hike from 1.50% to a forecasted 1.75%.
Considering the potential impacts of this expected rise, let’s look at the following figures.
Figure 1: Swiss National Bank Historical Policy Rate, forexfactory.com
The policy rate in Switzerland provides details regarding the determined interest rate by the Swiss National Bank from March 24, 2022 to March 2023 (Figure 1).
The data shows a constant upward trend in interest rates starting from -0.75% in March 24, 2022, gradually progressing to 1.50% by March 23, 2023.
Now let’s discuss how previous interest rate decisions have affected the USD/CHF currency pair:
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Figure 2: USD/CHF currency pair % change in price, 30min timeframe, investing.com
The USD/CHF currency pair percentage change in price provides insights into the 30-minute time frame movements following the announcement of Switzerland’s policy rate (Figure 2).
We see that from June 16, 2022, to December 15, 2023, the USD/CHF pair witnessed a rise following the announcement of the SNB’S decision to increase rates (Figure 2).
On September 22, 2022, the price of the USD/CHF pair rose by 1.65%, marking a higher benchmark for the previous monetary decisions (Figure 2). This movement explains the battle held between the aggressiveness of the Federal Reserve compared to the SNB, whereby despite a rise of 0.50% in Switzerland we witnessed a rise of 0.75% in the U.S.
Consequently, the increase in value of the Swiss franc was not able to reach that of the U.S. Dollar, which led to this 1.65% increase (Figure 2).
However, on March 23rd, 2023, we can see that the USD/CHF pair declined by -0.25% (Figure 2). In fact, on Wednesday 22nd March, the Fed decided to increase interest rates by 0.25%, which was lower than the 0.50% policy rate increase of the SNB (Figure 1). This difference in interest rates explains the 0.25% drop in the USD/CHF pair, which was due to the appreciation of the CHF compared to the U.S Dollar.
Following this trend, should we expect the Swiss National Bank (SNB) to meet analysts’ expectations of a 25-bps rise? Consequently, will the USD/CHF pair move accordingly after the Fed decided to pause on rates.
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