USD/CHF retakes 0.8800 after SNB cuts rates by 25 bps; remains below 200-day SMA

The USD/CHF pair reverses an intraday dip to the 0.8755 area or a one-week low touched during the early European session on Thursday and spikes to a fresh daily high in reaction to the Swiss National Bank (SNB) policy decision. Spot prices climb back above the 0.8800 mark in the last hour, though bulls might wait for a sustained move beyond a technically significant 200-day Simple Moving Average (SMA) before placing fresh bets. 

The Swiss Franc (CHF) weakens across the board after the SNB, as was expected, lowered the benchmark Sight Deposit Rate by 25 basis points (bps) to 0.25% from 0.50% at the end of its monetary policy assessment for the March quarter. Furthermore, the central bank said that it will continue to monitor the situation closely and adjust its monetary policy if necessary amid the low inflationary pressure and the heightened downside risks to inflation. Apart from this, a generally positive risk tone undermines the safe-haven CHF, which, along with a modest US Dollar (USD) uptick, acts as a tailwind for the USD/CHF pair. 

The Federal Reserve (Fed) decided to keep interest rates unchanged at the end of a two-day policy meeting on Wednesday and maintain its forecast for only two 25 bps rate cuts by the end of this year. Moreover, the Fed gave a bump higher to its inflation projection, which, in turn, is seen as a key factor lending some support to the buck. Any meaningful USD appreciation, however, seems elusive amid the growing market acceptance that the US central bank would resume its rate-cutting cycle sooner than expected amid the uncertainty about the impact of US President Donald Trump's tariffs on US economic activity. 

Furthermore, persistent geopolitical risks stemming from the ongoing conflict in the Middle East should offer some support to the CHF and contribute to capping the USD/CHF pair. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom and positioning for any meaningful recovery from the year-to-date low, around the 0.8760-0.8755 region touched on March 10. Traders now look forward to the US economic docket – featuring Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales – for some impetus.