Euro jumps vs Swiss Franc after SNB decision, German IFO data supports

The Swiss Franc gained strength ahead of the Swiss National Bank (SNB) policy decision, trading around 0.8240 during Asian hours on Thursday. Traders were anticipating the SNB's interest rate decision later in the day. Economists at DBS Group Research anticipated the SNB to maintain its policy rate at 0% during the September 24 meeting, but they still believed there was potential for a change in the bank's projections.

The SNB remained optimistic, projecting a higher near-term inflation forecast due to the impact of high energy prices on the economy and persistent uncertainty in the Middle East. Despite Swiss growth improving and recent easing in CHF pressure against the Euro and Pound, the urgency for a policy move was decreasing. Meanwhile, the USD/CHF pair declined as the US Dollar (USD) lost its daily gains and halted its three-day winning streak, even though hawkish sentiment surrounding the Federal Reserve (Fed) policy outlook persisted.

This sentiment was fueled by the latest Flash US S&P Global PMI data for September, which showed manufacturing expanding faster than expected at 52.0, offsetting slight declines in services and composite activity. With expectations of a 25-basis-point Fed rate hike in October increasing to nearly 69.7%, traders shifted their focus to the upcoming US weekly Initial Jobless Claims report, while some Fed officials reiterated support for the recent rate increase and raised concerns about persistent inflation risks.

The USD/CHF pair was trading at 0.8240, with a bullish near-term bias as it remained above both the short-term and medium-term exponential moving averages. The 9- and 50-period Exponential Moving Averages (EMAs) were situated below the market, indicating an underlying uptrend structure, while the 14-day Relative Strength Index (RSI) was near 63, suggesting strong but not extreme positive momentum.

The FXS Fed Sentiment Index was around 148, reinforcing a supportive macro backdrop for the dollar. Traders noted initial support at the 9-period EMA at 0.8213, with deeper cushioning from the 50-period EMA near 0.8121 if corrective pressures persisted. The pair appeared poised to continue advancing as long as it remained above 0.8213, although the elevated RSI indicated that upside potential might diminish if momentum approached overbought territory.