USD/CHF Forecast Ahead of the SNB Rate Decision

The USD/CHF price is bouncing back ahead of the first Swiss National Bank (SNB) interest rate decision. The pair rose to 0.9302 on Tuesday, which is 1% higher than last week’s low of 0.9212.

Switzerland stronger recovery

Like all countries, Switzerland went through a rough patch in 2020 because of the coronavirus pandemic. However, the country’s weakness was better than that of most countries.

It contracted by 2.9% in 2020, the worst performance in more than 40 years. This decline was significantly better than the government’s prediction of a 3.3% contraction. In contrast, the Eurozone GDP contracted by 6.2% in 2020.

Further data from Switzerland are significantly better than those of its comparable countries. Its unemployment rate remains at 3.0%, while the overall EU’s is at 8.2%. Its manufacturing and services sectors have also done well.

This performance is mostly because of the stimulus package offered by the country’s government. In total, it spent more than CHF 60 billion to help the companies and individuals. It also lowered individual taxes and provided more measures to prevent layoffs.

Swiss National Bank ahead

The SNB has also put measures in place to support the country’s economy. It left interest rates in the negative zone. It also announced several measures to ensure that there was enough liquidity in the country. For example, it set up a COVID-19 refinancing facility (CRF), which ensures that liquidity can be accessed as a covered loan against credit claims. 

It is against this backdrop that the SNB will start its two-day monetary policy meeting tomorrow. Going by the previous guidance, the bank will leave interest rates unchanged at -0.75%, where they have been since January 2015. 

Still, analysts will be watching for the bank’s economic and inflation outlook. Recent data showed that consumer prices remain significantly below the target of 2%. Indeed, the headline consumer price index (CPI) declined to 0.5% year on year in February. And recently, the State Secretariat for Economic Affairs (SECO) said that it expects the economy to rebound by 3% in 2021. 

US dollar strength

Meanwhile, the USD/CHF is also rising mostly because of the stronger US dollar. The dollar index has risen in the past two days as investors continue focusing on the Treasuries market. 

After reaching a 14-month high of 1.73% last Friday, the yield of the Treasuries market has eased this week. It is trading at 1.665%, while the yield of the 30-year has dropped to 2.37%. This is happening, in part because of the fading fears of high inflation.

Still, the situation could change as Jerome Powell and Janet Yellen testify before congressional committees on Tuesday and Wednesday. The two are expected to say that the country’s economy is going through an uneven recovery.

USD/CHF technical outlook

The USD/CHF pair rose to an intraday high of 0.9316 on Tuesday afternoon. This was a notable price since it has resisted moving above it several times before. It is also slightly above the short and longer-term moving averages (MAs) and is 0.65% below the year-to-date (YTD) high of 0.9375. Therefore, while the outlook for the pair is neutral, any move above the current resistance will be a victory for bulls, who will continue pushing it to the YTD high.