Swiss Franc Falls On SNB's Surprise Rate Cut

(RTTNews) - The Swiss franc weakened against other major currencies in the European session on Thursday, after the Swiss National Bank reduced its benchmark rate by a sharper-than-expected 50 basis points to curb the strength of the Swiss franc.

At the first policy meeting of Martin Schlegel as chairman, the policy rate was lowered to 0.50 percent from 1.00 percent. The new rate takes effect on December 13.

The bank has cut its rates four times this year. Markets anticipated only a quarter point reduction.

The bank said underlying inflationary pressures decreased again and it will continue to monitor the situation closely and will adjust its policy if necessary to ensure price stability over the medium term.

However, the economist expects at least one more rate cut next year as policymakers will be forced to revise down their expectations for inflation over their forecast horizon.

Investors await the European Central Bank (ECB) rate decision later in the day.

The ECB is widely expected to cut its benchmark rates by 25 basis points for the third consecutive meeting, citing weaker economic growth and moderating inflation.

Traders will closely monitor ECB President Christine Lagarde's press conference following the monetary policy decision.

Earlier today, the Swiss National Bank cut its interest rate by 50 basis points, its biggest reduction in almost 10 years amid an ongoing tussle with depressed inflation and a strong Swiss franc.

Investors also waited for French President Emmanuel Macron to appoint a new prime minister.

Macron is seeking a political deal that would allow him to both name a new prime minister and "guarantee the stability of the country," a spokesperson for the outgoing government said Wednesday and insisted there was at the moment no "broader" political alliance than the current one between his centrist allies and conservatives from the Republicans party.

Commodity-related stocks traded higher on optimism around more stimulus measures from Beijing.

In the European trading today, the Swiss franc fell to more than a 2-week low of 0.9344 against the euro, a 5-week low of 1.1349 against the pound and more than a 2-week low of 0.8893 against the U.S. dollar, from early highs of 0.9276, 1.1258 and 0.8817, respectively. If the franc extends its downtrend, it is likely to find support around 0.94 against the euro, 1.14 against the pound and 0.90 against the greenback.

Against the yen, the franc edged down to 171.46 from an early more than a 2-week high of 173.01. The franc may test support near the 168.00 region.

Looking ahead, the European Central Bank will announce its monetary policy decision at 8:15 am ET. The ECB is widely expected to cut its benchmark rates by 25 basis points for the third consecutive meeting, citing weaker economic growth and moderating inflation.

In the New York session, Canada building permits for October, U.S. PPI for November and U.S. weekly jobless claims are slated for release.