Swiss National Bank Hikes by 75 Basis Points, EUR/CHF Pops Higher

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Swiss National Bank, EURCHF Forecasts and Analysis

  • SNB hikes rates by an out-sized 75 basis points to 0.50%.
  • EUR/CHF rally on possible fx intervention.

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The Swiss National Bank (SNB) jacked up interest rates by 75 basis points today to take the official borrowing rate into positive territory for the first time in over a decade. Financial markets had fully priced in a 50bp increase with commentators leaning toward a three-quarters-of-a-percent-rise in recent days. The SNB said that they cannot rule out further rate increases, ‘to ensure price stability over the medium term’, while the central bank also said that it is ‘willing to be active in the foreign exchange market as necessary’.

The SNB now anticipates GDP growth of 2% this year, half a percentage point lower than at the last meeting. The central bank also noted that inflation, 3.5% in August, is likely to remain at an ‘elevated level’ for the time being.

The immediate reaction in the FX market saw the Swiss Franc weaken against the Euro with traders leaning on the central bank’s warning that it is willing to be active in the FX market. Traders with long memories will know not to bet against the SNB.

EUR/CHF One Minute Price Chart, September 22 2022

Retail trader data shows 67.74% of traders are net-long with the ratio of traders long to short at 2.10 to 1. The number of traders net-long is 3.70% lower than yesterday and 5.32% lower from last week, while the number of traders net-short is 11.05% lower than yesterday and 10.56% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggest EUR/CHF prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/CHF-bearish contrarian trading bias.

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily -6% -7% -7%
Weekly -9% -4% -7%

What is your view on the Swiss Franc – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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