SNB Cuts Rates AgainThe SNB caught traders off-guard today and became the latest bank in the G10 bloc to ease this month, cutting rates by .25% to 1.25%. Following an earlier cut three months ago, the SNB noted that underlying inflationary pressure had fallen once again, making conditions appropriate for further easing. Ahead of the meeting, the SNB had been in a three-week period of silence which created some uncertainty around the meeting with most investors projecting that the bank would hold rates steady. SNB/ Fed DivergenceAlongside the rate cut, the SNB also lowered its inflation outlook for the year ahead with CPI set to average 1.3% this year and 1.1% next year, well within the bank’s 0%-2% target range. The meeting stands in stark contrast to the FOMC last week which saw the Fed keeping rates on hold while revising its inflation and dot-plot forecasts higher. Traders have consequently scaled back their easing expectations with only one cut seen in November so far. Bullish USDCHF OutlookWhile the current narrative holds, USDCHF looks likely to continue higher near-term. The downward revision to the SNB’s inflation forecast opens the door to further SNB easing near-term while Fed easing expectations aren’t likely to solidify until we see a drop below 3% in US CPI. Technical Views USDCHFThe pair has been trending lower within a bear channel following the reversal from YTD highs. Price is now bouncing off the channel lows and attempting to get back above the .8907 level. Back above there, focus will be on a test of the .90 level next. If we fail here, .8717 remains the next bear target, in line with weaker momentum studies readings.   More By This Author:UK Market Commentary – Thursday, June 20
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