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SNB Stayed Out of FX Markets Despite Third-Quarter Franc Rally
USD/Swiss Franc analysis: After the Swiss National Bank unexpectedly cut interest rates by 0.50%, the Swiss Franc declined.
On Thursday (December 12), during the European session, USD/Swiss Franc rose by 0.8% in the morning, reaching a two-week high, after the Swiss National Bank unexpectedly cut interest rates by 50 basis points (from 1% to 0.50%), while the market generally expected a 25 basis points cut. This marks the fourth policy easing in 2024 after three 0.25% cuts in March, June, and September, and it is also the largest rate cut in nearly a decade. The Swiss National Bank indicated it will continue to monitor the situation and take appropriate actions to maintain price stability and keep inflation within the target Range of 0%-2% (the inflation rate in November was 0.7%).
The Swiss Franc Central Bank has implemented its largest interest rate cut since the "Black Swan" event in 2015, nearly returning to a zero interest rate.
① The extent of this interest rate cut exceeded the expectations of most economists; ② The mainstream view holds that, faced with low inflation and the pressure of the European Central Bank continuing to cut rates, the Swiss National Bank will return to "zero interest rates" next year; ③ Due to the weakness of the European economy, political crises in France and Germany, and the risk effect from Trump, funds are flowing into the Swiss Franc for safe-haven and speculation, and the Swiss Franc/Euro has reached a new high in nearly 10 years.
Under the dual pressure of the strong Swiss Franc and low inflation, the Swiss National Bank is gradually moving towards zero interest rates.
As the Swiss National Bank may lower borrowing costs this week, the Swiss Franc's two-year period of positive interest rate policy is nearing its end.
Swiss Franc Could Turn Weaker as Rate Differentials Outweigh Safe-Haven Demand -- Market Talk
SNB Set for Half-Point Cut After Inflation Data Undershoots Forecasts -- Market Talk