Fed Chair Powell’s Speech in Focus After SNB Rate Cut

Swiss National Bank(SNB) surprises markets with a 25 basis points rate cut. USD/CHF climbs, while BoE holds rates, impacting GBP/USD. US data boosts dollar.

In a move that caught markets off guard, the Swiss National Bank (SNB) has slashed its key policy rate by 25 basis points, dropping it from 1.75% to 1.50%. This surprise reduction addresses concerns about inflation lingering below 2%, a level deemed necessary for price stability by the SNB. The rate cut will ensure conducive monetary conditions while boosting economic activity.

The announcement weakened the Swiss franc, with the USD/CHF currency pair climbing as high as 0.8975 immediately. Market analysts anticipate further upward movement, with the pair reaching an overnight peak of 0.8994 and likely to continue its ascent.

In contrast, in the UK, the Bank of England (BoE) opted to maintain its official bank rate at 5.25%, despite one member advocating for a 25 basis point reduction to 5.0%. This decision weighed on the pound sterling, causing GBP/USD to tumble from 1.2780 to an overnight low of 1.2650.

Fed Chair Powell’s Speech in Focus After SNB Rate Cut

Meanwhile, favorable economic indicators in the US continue to signal a robust labor market and substantial economic expansion. Unemployment claims came in lower than expected, while the flash Composite PM reading for March surpassed market forecasts. These developments bolstered the dollar index (DXY), propelling it above the 104 threshold overnight.

As traders gear up for the Asia session, the focus remains on the Dollar Index (DXY), which is currently bullish, reaching 104.20. On the other hand, gold prices experienced downward pressure, dipping below $2,200/oz to touch a low of $2,165/oz during the US session.

Market participants eagerly anticipate remarks from Federal Reserve Chair Jerome Powell and Governor Michael Barr. Analysts expect their speeches to offer insights into the Fed’s outlook on monetary policy, potentially influencing bond yields and the dollar’s direction.

In summary, the unexpected rate cut by the Swiss National Bank underscores concerns about inflation and aims to bolster economic activity. While the UK maintains its interest rates, the US continues to show signs of economic resilience, supporting the dollar against its peers.

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