Swiss Franc Plummets After SNB Introduces Negative Interest Rates

Talking Points:

• Swiss National Bank introduces negative interest rates
• SNB reiterates it will continue to defend 1.20 EUR/CHF floor
• EUR/CHF jumps by 80 pips from 1.2010 to 1.2092

The Swiss National Bank (SNB) has surprised markets by introducing negative interest rates, and has reiterated that it will continue to defend the 1.20 EUR/CHF floor with the “utmost determination”. This follows a long period where the exchange rate has threatened to dip below the floor multiple times. The new LIBOR target range by the central bank will be -0.75% to 0.25%. The SNB also announced it is “prepared to buy unlimited foreign currency to shield [the] cap”.

Following the announcement, EUR/CHF rose from 1.2010 to 1.2092 within the space of 15 minutes. Meanwhile USD/CHF rallied by close to 100 pips. Currency Strategist Ilya Spivak sees the next potential resistance for the pair at 0.9835, while support rest at 0.9660.

EUR/CHF (5 Min Chart)