SNB and BoE Hike Rates, but BoJ Stays Ultra Loose

Yesterday and today in Asia, three more central banks took center stage, and those were the SNB, the BoE and the BoJ. The SNB surprised the markets and hiked by 50bps, at a time when the consensus was for no change, while the BoE raised interest rates by 25bps, as was broadly expected. Today, during the Asian session Friday, the BoJ maintained its ultra-dovish stance, widening further its monetary policy divergence with the rest of the world.

SNB Surprises the Markets, Lifting Rates by 50bps

This past week was a central bank week, with the Fed and the ECB holding meetings on Wednesday (ECB’s gathering was an ad-hoc one), the SNB and the BoE deciding on policy yesterday, and the BoJ announcing its own decision today. The Fed lifted rates by 75bps, while the ECB discussed “fragmentation” risks, but we talked and analyzed those outcomes in more detail in yesterday’s daily report. So, today, we will discuss the SNB, the BoE and the BoJ decisions.

Getting the ball rolling with the SNB, this Bank surprised the financial world with its decision to lift interest rates by 50bps, from -0.75% to -0.25%. The consensus was for officials to keep interest rates untouched. This was the SNB’s first rate hike in 15 years, with policymakers noting that they are ready to continue pushing that hike button. They also dropped the reference saying that the Swiss franc is highly valued. Therefore, the unexpectedly hawkish outcome lifted the Swiss franc against all the other major currencies. So, now the SNB has joined the hawkish chorus, depending on how fast they are planning to move ahead, the Swiss franc could outperform some of its major peers. For now, we see as a better gauge to exploit any further franc gains, the CHF/JPY pair. This is because, overnight, the BoJ maintained its ultra-loose policy, staying as the only dovish major central bank. We will discuss that outcome in a while.

BoE Hikes by 25bps, but Signals Readiness to Do More if Needed

Having said all that though, we are reluctant to call for a trend reversal in the pound. The Bank itself warned that the economy may have contracted in the second quarter, and thus, more data revealing an ugly picture could prompt market participants to scale back their hike bets, and thereby result in another round of selling in the British currency. For now, we will treat yesterday’s recovery as a corrective move.

GBP/CHF — Technical Outlook

Traders of this pair may decide to challenge the 1.1980 zone as a resistance this time, and then allow another round of selling and another test at 1.1800. If that barrier gets broken, then a forthcoming lower low will be confirmed and we may experience extensions towards the low of December 11th, 2020, at around 1.1680. Another dip, below 1.1680, could extend the fall towards the 1.1595 zone, marked by the low of September 11th.

On the upside, we would like to see a clear rebound back above 1.2130 before we start examining whether the bulls have gained full control. Such a move will confirm a forthcoming higher high and may initially pave the way towards the high of June 9th, at around 1.2290. Another break, above 1.2290, could carry more bullish implications and may see scope for advances towards the peak of May 17th, at around 1.2445.

BoJ Stays as the only Dovish Major Central Bank

EUR/JPY — Technical Outlook

A clear and decisive break above 141.50 could signal extensions towards the 144.20 zone, marked by the highs of June 8th and 9th. That said, if the bulls are not willing to stop there, then we may see them climbing towards the 147.20 territory, marked by the high of December 29th, 2014.

The outlook could turn negative again, upon a break below 137.80, which is the low of June 16th. This will confirm a forthcoming lower low and could initially target the low of May 31st, at around 136.80. If that barrier is also broken, then we may experience extensions towards the 135.20 territory, marked by the low of May 26th, the break of which could pave the way towards the low of May 19th, at around 133.90.


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