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CHF Surges Following SNB Hike, USD Index Slides Over 1.5%

FOREX
  • The significant march higher in US yields during early trade on Thursday was entirely reversed throughout the US session, weighing substantially on the greenback. The USD index has retreated the best part of 1.5%, extending on the prior day’s minor pullback after the June FOMC decision.
  • The Swiss Franc surged on Thursday against all G10 ccys to be the best performer globally following the SNB rate decision. The Bank surprised markets by raising rates by 50bps to -0.25%, a move markets had seen the SNB waiting until September to execute.
  • The late dollar weakness has exacerbated the price action in USDCHF, which looks set to post losses of close to 3% on the day. USDCHF had been on a one-way mission throughout June, grinding from around 0.9550 all the way to yesterday’s high print of 1.0050. The SNB move, considerable weakness in major equity indices sparking safe haven flows and the greenback turnaround has seen the pair reverse almost the entirety of the June upswing in two swift sessions. The May lows at 0.9545 are the short-term point of focus.
  • Bank of England also prompted GBP volatility. With markets pricing in a small chance of a larger than consensus rate hike, the 25bp increase initially weighed on GBP. Following the new hardened guidance however, sterling weakness was short-lived and cable forcefully reversed course to rise around 3% from worst levels and probe the 1.2400 handle.
  • The other notable performers amid the USD weakness were NZD (1.64%) and the single currency. EURUSD (+1.45%) remained bid all session long and remains pinned to the highs approaching the APAC crossover following ECB’s Lagarde reportedly outlining triggers (limit on bond spreads) for the central bank’s new anti-fragmentation tool. Initial resistance is being tested at 1.0596, the 20-day EMA, however, the key channel top, currently intersecting at 1.0698 remains in focus.
  • Bank of Japan is the main risk event overnight before Fed Chair Powell speaks on Friday, due to deliver welcoming remarks at the Inaugural Conference on the International Roles of the US Dollar, in Washington DC.
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  • The significant march higher in US yields during early trade on Thursday was entirely reversed throughout the US session, weighing substantially on the greenback. The USD index has retreated the best part of 1.5%, extending on the prior day’s minor pullback after the June FOMC decision.
  • The Swiss Franc surged on Thursday against all G10 ccys to be the best performer globally following the SNB rate decision. The Bank surprised markets by raising rates by 50bps to -0.25%, a move markets had seen the SNB waiting until September to execute.
  • The late dollar weakness has exacerbated the price action in USDCHF, which looks set to post losses of close to 3% on the day. USDCHF had been on a one-way mission throughout June, grinding from around 0.9550 all the way to yesterday’s high print of 1.0050. The SNB move, considerable weakness in major equity indices sparking safe haven flows and the greenback turnaround has seen the pair reverse almost the entirety of the June upswing in two swift sessions. The May lows at 0.9545 are the short-term point of focus.
  • Bank of England also prompted GBP volatility. With markets pricing in a small chance of a larger than consensus rate hike, the 25bp increase initially weighed on GBP. Following the new hardened guidance however, sterling weakness was short-lived and cable forcefully reversed course to rise around 3% from worst levels and probe the 1.2400 handle.
  • The other notable performers amid the USD weakness were NZD (1.64%) and the single currency. EURUSD (+1.45%) remained bid all session long and remains pinned to the highs approaching the APAC crossover following ECB’s Lagarde reportedly outlining triggers (limit on bond spreads) for the central bank’s new anti-fragmentation tool. Initial resistance is being tested at 1.0596, the 20-day EMA, however, the key channel top, currently intersecting at 1.0698 remains in focus.
  • Bank of Japan is the main risk event overnight before Fed Chair Powell speaks on Friday, due to deliver welcoming remarks at the Inaugural Conference on the International Roles of the US Dollar, in Washington DC.