• The SNB cut interest rates by 25 basis points to 0% as widely expected.
  • The EUR/CHF eased after the decision, although it remains within previous ranges.
  • Deflationary pressures have boosted speculation that the SNB might revive negative interest rates.

Buy the rumour, sell the fact for the EUR/CHF on Wednesday, as the pair has reacted lower to the Swiss National Bank’s decision to cut its benchmark rate by 25 basis points, to 0% after its monetary policy meeting.

The EUR/CHF has pulled back from the 0.9420 area to levels right below the 0.9400 level. From a wider perspective, however, the pair remains trading sideways, in the upper range of the last two months' horizontal channel, from 0.9300 to 0.9440.

A dovish SNB is weighing on the Swiss Franc

The SNB has been one of the most dovish among the major central banks, slashing rates by 175 basis points since March 2024, forced by deflationary pressures in the Swiss economy.

Consumer prices fell into negative levels in May for the first time since 2021. The yearly CPI contracted at a 0.1% pace, and boosted speculation that the SNB might be the first major central bank to revive negative interest rates.

The dovish SNB policy is offsetting the positive impact of risk aversion in the safe-haven CHF, allowing the Euro to appreciate about 0.8% in the last four weeks. The pair, however, is nearing a key area at the mentioned 0.9445, which is likely to pose a significant challenge for bulls, especially if geopolitical tensions remain high.

(This story was corrected on June 19 at 08:42 GMT to say that the EUR/CHF eased after the decision, and not the EUR/USD as previously reported.)

SNB FAQs

The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.

The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.

The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.


Source: Fxstreet