The outlook for the Swiss National Bank's interest rate cut remains uncertain, with the overnight hedging cost of the Swiss Franc seeing its largest increase since 2015
The Swiss National Bank will announce its interest rate decision on Thursday, with uncertainty surrounding the prospect of a rate cut. The overnight hedging cost for the Swiss Franc has seen its largest increase since 2015, and investors have been speculating on the Swiss National Bank's next steps. The overnight volatility of the Euro against the Swiss Franc has risen to its highest level since 2023. The Swiss National Bank may provide guidance to boost the Swiss Franc. The market is pricing in a 70% chance of a rate cut, while economists' views on the outcome are generally mixed. The Swiss Franc has risen by over 4% against the Euro as political turmoil in France has led investors to seek safe havens
Zhitong Finance APP noticed that since the Swiss National Bank unexpectedly lifted the Swiss franc exchange rate floor in 2015, the overnight hedging cost of the Swiss franc has seen the largest increase in nearly 10 years. The Swiss National Bank will announce its interest rate decision on Thursday. Economists have differing expectations, with a slight majority expecting the Swiss National Bank to maintain interest rates.
It has been three weeks since the last public comments from Swiss National Bank policymakers. Since then, the market has been volatile, the Swiss franc has risen, and investors have been speculating on the Swiss National Bank's next steps. This has led to the cost of hedging the Swiss franc reaching its highest level since 2022 on the day before the Swiss National Bank meeting.
The overnight volatility of the Euro against the Swiss franc has risen to 18.27%, the highest level since March 2023, when global banking concerns dominated market sentiment. Now, this depends on policy risks, with Goldman Sachs strategists pointing out that the Swiss National Bank may provide guidance on selling foreign currency to boost the Swiss franc.
Traders also have differing opinions on whether the Swiss National Bank will take action on interest rates. The currency market expects a 70% chance of a 25 basis point rate cut on Thursday, while economists' views on the outcome are generally mixed.
Options changes also reflect positions in the spot market, as short-term risk exposure widens, benefiting the Swiss franc. Since the end of May, the Swiss franc has risen more than 4% against the Euro, reaching its highest level in four months, as political turmoil in France has led investors to seek safe havens