On Sep 21 the Fed hiked by 75 bps to 3.00-3.25% and Jerome Powell delivered a significant hawkish message expanding the terminal rate to 4.6% for 2023, up from 3.8% prior. Powell affirmed the dot plot in his statement by saying that it is likely that rates will get to levels in the Dot Plot. This was a hawkish statement and that kept the USD bid.

The following morning the Swiss National Bank met and it hiked interest rates by 75bps. However, Short Term Interest Markets (STIR) had priced in a nearly 100% chance of a 100bps hike. This meant the CHF sold off heavily on the decision and sent the USDCHF sharply higher.

This divergence should favour USDCHF upside in the near term with a divergence in the central banks’ move relative to the market’s pricing for their rate decisions.

Major Trade Risks: The major risk here is if the SNB or the Fed makes any significant announcements that change this outlook.


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