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Franc soars on Swiss National Bank hawkish surprise

( 3 min read )

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20 June 2022

Written by
Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.

Currency rankings last week were topped by an unusual winner, the Swiss franc.

he Swiss National Bank joined the chorus of hawkish central bankers and surprised markets with a 50 basis point rate hike when no move was expected, sending the franc screaming higher against every other currency. The sharp fall in risk assets worldwide had a mixed impact on currencies. The euro held its own against the dollar after an emergency ECB meeting calmed peripheral debt markets. Emerging market currencies had a mixed week, some up, some down, without a clear theme driving performance.

Now that key central bank meetings are behind us, markets will focus on leading and coincident macroeconomic data to see whether recession fears evident in equity markets are justified. Thursday is shaping up to be a key day in this respect, as the PMIs of business activity are released in the Eurozone, the UK and the US. These are particularly informative in the first two. We expect all the indices in all of the three economic zones to remain consistent with continued expansion, which may alleviate recession fears.


The Bank of England provided investors with yet another change in direction at its meeting last week. While the hike was largely expected, there were three hawkish dissenters, no dovish ones, and MPC communications turned hawkish, emphasising flexibility in responding to inflationary surprises, including 50 bp hikes if needed. Sterling reacted well to the news, and though it lost some steam on Friday, it ended the week up against the US dollar.

In addition to the key PMI release, we will see the inflation report for May released this week. A new record print could see markets price in more Bank of England hikes, and somewhat paradoxically serve to support the pound.


The ECB ad hoc emergency meeting, brought about by exploding spreads between peripheral sovereign debt and that of core countries, calmed the markets, in spite of the absence of details. While this was enough to put a temporary floor under the common currency, we expect that markets will demand details soon.

This week’s scheduled ECB speakers could shed some much-needed light on the anti-fragmentation tool. Aside from that, Thursday’s advance PMIs should put to rest immediate contraction fears and could serve as a catalyst for a higher euro.


The Federal Reserve reacted to the inflation surprise of the week prior with an outsized 75bp hike, the first one in three decades, and a strongly hawkish message. While stock markets and risk assets in general reacted as one would expect (negatively), the dollar performance was more mixed and it failed to put in a really convincing rally.

The PMIs are generally less market moving in the US than elsewhere. Instead, there will be a lot of market focus on Fed chair Powell’s annual testimony to Congress, on Wednesday and Thursday, where we expect him to further clarify the extent to which the Federal Reserve is willing to constrain economic activity in order to bring inflation back down to target.

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