Swiss Franc Rockets Higher on Rate Hike Surprise From SNB

USD fell yesterday as the CHF rally stole the show following an unexpected rate hike from the SNB. BOE hiked by 25bps, refraining from a larger hike, while signalling more to come in August. Equities plunged amidst fresh central bank tightening. Commodities recovered on a weaker USD. 

Key Factors for Today

• USD rally interrupted by surprise hike from SNB

• BOE hikes by 25bps, signals more to come 

• Equities fall on further central bank tightening

• Metals recover on USD weakness

• Oil prices bounce off lows 

Coming Up

• EUR Eurozone final CPI

• USD Fed’s Powell speaks

• USD Industrial production

The US Dollar has stabilised over the European open on Friday following heavy losses yesterday as the SNB’s surprise hike seemed to steal the Fed’s thunder. With the BOE hiking rates also, the Dollar failed to follow through on the initial strength we saw after the FOMC. Today, traders will be paying close attention to Fed chairman Powell who speaks later with USD bulls hoping his comments will prove the catalyst for a final show of strength into the weekend. 

Equities markets have stabilised today following heavy losses yesterday as traders reacted to the latest wave of central bank tightening. The FTSE fell by almost 5% as the BOE hiked rates again and signalled more to come. US stocks pushed lower also, despite the weakness in USD. The Nikkei fell too, despite the BOJ reaffirming its commitment to maintaining an easing stance in the markets. 

In FX, the big story is the volatility we’ve seen in CHF on the back of yesterday’s surprise rate-hike from the SNB.  The Franc rallied almost 4% against the Dollar and almost 3% against the Euro following an unexpected 50bps hike from the SNB. The BOE hiked rates also yesterday though refrained from a larger hike and stuck to the expected 25bps hike. Along with the increase the BOE also signalled the potential for a larger 50bps hike in August if inflation continues higher near-term. 

Metals prices are a little softer today, amidst a firmer start for the Dollar. However, both gold and silver have recovered well off the week’s initial lows, benefitting from late USD weakness. With equities looking vulnerable to further losses, should USD continue to correct, there might be room for metals to break higher. 

Oil prices were seen bouncing 5% off the lows yesterday amidst the turn-around in USD. Longer-term, Fed tightening and the projected tightening still to come this year will create headwinds for oil prices. However, for now oil is still underpinned by broader supply concerns, keeping the focus on a continuation higher from current levels unless the USD can find its way higher again.