USDCHF AND GBPUSD RETREAT AS SNB AND BOE RAISE RATES

The Swiss franc jumped sharply against the US dollar and euro after the Swiss National Bank (SNB) made a surprise rate hike. In a statement, the bank decided to hike interest rates by 0.50%. This was the first time that the bank has hiked rates in 15 years. It was also a surprise considering that most analysts were expecting the bank to leave interest rates unchanged. In a statement, the bank said that the hike was necessary to counter the rising inflation. The statement added:

“The tighter monetary policy is aimed at preventing inflation from spreading more broadly to goods and services in Switzerland. It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future.”

Global stocks plummeted as investors reacted on the extremely hawkish statement by the Federal Reserve. In its decision, the bank decided to hike rates by 0.75%, the first time it has done that in over 28 years. As a result, stocks are falling because this is a new normal in the market. At the same time, the bond sell-off continued, with the ten-year yield rising to 3.443% and the 30-year rising to 3.44%. Futures tied to the Dow Jones and Nasdaq 100 index fell by 550 and 300 points, respectively.

The FTSE 100 and sterling retreated even after the Bank of England raised interest rates for the fifth straight month. The bank hiked by another 0.25%, pushing the headline rate to 1.25%. It hiked even as it projected that the economy will also contract by 0.3% in the current quarter. Further, it expects that inflation will continue rising in the coming months due to the rising oil and gas prices and the tight labor market. It sees inflation hovering above 9% in the second and third quarter.

GBPUSD

The GBPUSD pair retreated sharply after the latest interest rate decision by the BOE. It is trading at 1.2070, which is lower than this week’s high of 1.2160. On the hourly chart, the pair is trading at the 25-day moving average while the Relative Strength Index (RSI) has moved below the neutral point at 50. It will likely keep falling as bears target the next key support at 1.200.

USDCHF

The USDCHF pair crashed hard after the latest SNB interest rate decision. It dropped to a low of 0.9750, which was the lowest level since June 13. On the four-hour chart, the pair has formed what looks like a cup and handle pattern, which is usually a bullish sign. Oscillators have also tilted lower. Therefore, the pair will likely resume the bullish trend because of the cup and handle pattern.

EURUSD

The EURUSD pair moved sideways as investors reacted to the latest decision by the Fed. It is trading at 1.0416, which is slightly above this week’s low of 1.0356. It has moved below the 25-day and 50-day moving averages while the RSI has moved slightly higher. Therefore, the pair will likely resume the bearish trend.