Swiss franc in calm waters, but is there a storm ahead?

USD/CHF is trading quietly on Monday, after a tumultuous week. In the European session, USD/CHF is trading at 0.9276, up 0.15%.

Credit Suisse takeover, central banks take action

There was a flurry of activity on Sunday in response to the banking crisis which has shaved some $1 trillion from global financial shares this month. UBS has agreed to take over Credit Suisse, the second-largest bank in Switzerland. The move hasn’t stopped the bleeding at Credit Suisse, as its shares are down some 60% today. UBS shares are down 6% today and Deutschebank and other major European banks are also in the red.

As well, six central banks, including the Swiss National Bank (SNB) and the Federal Reserve announced they had coordinated action in order to boost liquidity. This move is aimed at restoring market confidence in the global banking system, which has been rocked by the failure of two US banks and the meltdown at Credit Suisse.

The Swiss franc was not immune to the market mayhem, as the sharp fall in Credit Suisse shares on Wednesday sent the Swissie tumbling by 2.1% and only settled down after intervention by the SNB. The Swiss franc, traditionally a safe-haven bastion, has seen its reputation tarnished as Swiss banks are in the middle of a banking crisis. Further developments in the Credit Suisse saga could lead to more volatility in the Swiss currency.

The market turmoil has seen market pricing for Wednesday’s Fed meeting shift from an increase of 50 basis points to 25, with an outside chance of a pause in hikes. The Fed has adopted a hawkish stance in its battle with inflation, but the latest crisis will make the Fed think twice about its pace of rate hikes. The markets have priced in a terminal rate around 4.25%, and with the current rate at 4.50% that means the markets are expecting the Fed to cut rates later this year.

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USD/CHF Technical

• USD/CHF is testing resistance at 0.9304. Above, there is resistance at 0.9382
• 0.9226 and 0.9110 are providing support

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