USD/CHF steadies around 0.8200 after SNB announces a quarter basis point rate cut

USD/CHF holds gains as the SNB reduced the benchmark Sight Deposit Rate by 25 basis points in Q2.
Switzerland’s trade surplus narrowed to CHF 2.0 billion in May, from April’s CHF 5.4 billion.
Risk aversion advances due to potential for the United States to become directly involved in the Israel-Iran dispute.

Akhtar Faruqui FXStreet

USD/CHF continues its winning streak for the fifth consecutive session, trading around 0.8200 during the European hours on Thursday. The pair holds gains following the release of the interest rate decision by the Swiss National Bank (SNB).

The Swiss Franc (CHF) faces challenges as the SNB decided to deliver a quarter basis point rate cut in the second quarter, bringing the benchmark Sight Deposit Rate to 0.00%, as widely expected. The weakening of the CHF could be restrained as markets were also pricing in 25% odds of a 50 basis point cut. SNB’s officials keep the door open for negative rates but emphasize it remains a less preferred policy option.

Moreover, Switzerland’s trade surplus declined to CHF 2.0 billion in May from a downwardly revised CHF 5.4 billion in April. The Swiss trade balance has marked the smallest surplus since December 2023, as monthly exports fell 13.6% to CHF 21.0 billion.

The USD/CHF pair appreciates as the US Dollar (USD) receives support as traders adopt caution amid escalating tensions between Israel and Iran. Bloomberg reported on Thursday that “US officials prepare for possible Iran strike in coming days.” “The US plans for any Iran attack continue to evolve.” Another report from the Wall Street Journal suggests that US President Trump had approved attack plans on Tuesday for Iran, but wanted to see if Tehran would abandon its nuclear program.

Economic Indicator

SNB Interest Rate Decision

The Swiss National Bank (SNB) announces its interest rate decision after each of the Bank’s four scheduled annual meetings, one per quarter. Generally, if the SNB is hawkish about the inflation outlook of the economy and raises interest rates, it is bullish for the Swiss Franc (CHF). Likewise, if the SNB has a dovish view on the economy and keeps interest rates unchanged, or cuts them, it is usually bearish for CHF.

GBP/USD remains slightly bid near 1.3300

GBP/USD now advances marginally and manages to dispute the 1.3300 region on Tuesday. Indeed, Cable regains some balance on the back of the lacklustre performance of the Greenback, all preceding the Fed’s meeting on Wednesday and the BoE’s gathering on Thursday.

EUR/USD recedes from tops, back below 1.1400

EUR/USD manages to set aside part of the recent weakness and clinches decent gains on Tuesday. Indeed, spot keeps the trade below the 1.1400 mark amid acceptable losses in the US Dollar, all following rising optimism of a US-Iran deal and steady caution prior to the FOMC gathering on Wednesday.

Gold bounces on poor US data

Gold remains under marked downside pressure on Tuesday, although the $4,000 zone per troy ounce emerges as a decent support for now. The precious metal’s pullback comes despite the modest losses in the US Dollar in a context of easing geopolitical tensions ahead of the key Fed event on Wednesday.

XRP falls toward $1.00 despite dwindling exchange reserves

Ripple (XRP) continues to trade under increasing pressure on Tuesday. This marks the second consecutive day of declines, reflecting broader risk-off sentiment as investors appear to shift gears in anticipation of the Federal Reserve (Fed) interest rate decision. On Wednesday, the Federal Open Market Committee (FOMC) is widely expected to leave interest rates unchanged in the 3.50%-3.75% range.

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