Rate Moves Diverge, USDCHF Slides

In a week marked by key monetary policy decisions, major central banks are taking varied approaches in response to shifting inflation and growth dynamics. The Swiss National Bank surprised markets by cutting rates to zero as inflation turned negative, while the Bank of Japan maintained its supportive stance but began scaling back bond purchases. Meanwhile, the Federal Reserve and Bank of England held rates steady, opting for a cautious approach amid sticky inflation and global uncertainty. Against this backdrop, USDCHF continues to trade with a bearish bias shaped by both policy divergence and technical weakness.

SNB Cuts Rate to Zero as Inflation Turns Negative

On June 19, 2025, the Swiss National Bank (SNB) cut its key interest rate by 0.25 percentage points to 0%. The move comes as inflation in Switzerland has dropped below zero, driven by falling tourism and energy prices. With lower inflation pressure, the SNB is easing policy to help keep prices stable over the medium term.

The central Bank now expects inflation to remain very low through 2027 and forecasts modest economic growth of 1% to 1.5% this year and next. While the Swiss economy grew strongly in early 2025, that was mostly due to a temporary boost in exports to the US. Growth is expected to slow in the coming months.

The SNB warns that global risks—especially trade tensions—could weigh on the outlook and says it remains ready to act if needed, including intervening in currency markets.

No Surprises as Fed Stays the Course

On June 18, 2025, the Federal Reserve decided to keep its key interest rate steady, aiming to hold the federal funds rate within a target range of 4.25% to 4.5%. The interest paid to banks on reserve balances remains at 4.4%, and the Fed also maintained its lending rate for banks at 4.5%.

To support this policy stance, the Fed will continue using various tools to manage the money supply and keep short-term interest rates stable. It will also stick to its current plan of gradually reducing its large holdings of government and mortgage-backed securities.

The Fed emphasized that it may update these measures as needed, depending on how the economy evolves.

BoJ Keeps Support in Place, Trims Bond Buys

On June 17, 2025, the Bank of Japan (BoJ) kept its key interest rate unchanged at around 0.5%, aiming to support the country’s moderate economic recovery. The Central Bank also announced a gradual plan to reduce its purchases of government bonds, aiming to scale back to 2 trillion yen per month by early 2027.

Japan’s economy is recovering modestly, with steady business investment and consumer spending, but some areas—like housing and exports—remain weak. Inflation has stayed around 3.5%, driven by rising food prices and higher import costs, though it’s expected to slow in the months ahead.

The BoJ expects inflation to rise gradually over time as labor shortages grow and long-term expectations increase. However, risks remain high due to uncertainty in global trade and policy decisions. The BoJ will continue to monitor economic conditions and financial markets closely.

Bank of England Holds Rates Steady Amid Slow Growth and Sticky Inflation

On June 19, 2025, the Bank of England kept interest rates unchanged at 4.25%, with six policymakers in favor and three voting for a small cut. Inflation has eased over the past two years but remains above the 2% target, rising to 3.4% in May due to higher energy and regulated prices.

The UK economy is showing weak growth and a softening job market. Wage growth is slowing, which could help bring inflation down over time. Still, the Bank remains cautious, aiming to keep rates high enough to prevent inflation from picking up again.

With global uncertainty and rising energy prices, the Bank says future rate decisions will depend on economic data and inflation risks rather than following a fixed path.

Technical Analysis

Since reaching a high of 0.91998 on January 13, USDCHF has been trending lower, driven by the impact of US tariffs along with a combination of technical and fundamental pressures. The pair continues to trade below both the 20- and 50-period Exponential Moving Averages (EMAs), which are downward sloping, signaling sustained bearish momentum.

Technical indicators reinforce the negative outlook. The Momentum Oscillator remains below the 100 level, indicating ongoing selling pressure, while the Relative Strength Index (RSI) is positioned below the 50 mark, suggesting strong downside participation.

If current conditions persist, downside targets to monitor are 0.81332, 0.80385, 0.79563, and 0.77969. Alternatively, a shift in sentiment and renewed buying could bring the focus to potential resistance levels at 0.82487, 0.83467, 0.84848, and 0.87578. Until then, the technical bias remains firmly bearish.

Conclusion

With central banks charting different courses—ranging from the SNB’s rate cut to the BoJ’s gradual bond taper and the Fed and BoE’s cautious holds—policy divergence is shaping currency dynamics. For USDCHF, this divergence, coupled with persistent bearish technical signals, keeps the pair under pressure. Unless there’s a shift in macro sentiment or a technical breakout, the path of least resistance remains to the downside. Traders should stay alert to evolving central bank signals and global risk sentiment as key drivers in the weeks ahead.