The Swiss currency was subjected to some profit taking after the National Bank decision and weakened back to 1.5550 against the Euro in New York. The franc found consistent support near 1.2330 against the US currency and strengthened to 1.2260, but was unable to break 1.2250.
National Bank Chairman Roth stated that policy was still accommodative after the 0.25% interest rate increase to 1.50%. The central bank will continue to push interest rates higher over the next few quarterly meetings with rates of 2.0% likely by year-end. Nominal yields will remain lower for the Swiss currency, but the gradual tightening will offer important background franc support.
Global stock and commodity prices have recovered strongly over the past 24 hours. Any further recovery in risk tolerances and gains for commodity prices would tend to weaken near-term franc demand. Underlying caution is, however, liable to continue which will limit the risk of aggressive Swiss currency selling and sentiment could switch rapidly again.
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