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Week Ahead: More big swings for USDCHF?

Trade of the Week: USDCHF to see 55% more volatility?

The Swiss Franc has been the most volatile G10 currency against the US dollar this week.

The turmoil from recent days surrounding Silicon Valley Bank and Credit Suisse has roiled USDCHF, while altering the market’s expectations for key central bank meetings due in the coming week.

And there could be more volatility in store for this FX pair, in a week that features these economic data releases and events:

Monday, March 20

  • CNH: China loan prime rates
  • EUR: ECB President Christine Lagarde speech

Tuesday, March 21

  • AUD: RBA meeting minutes release
  • EUR: Germany March ZEW survey expectations
  • CAD: Canada February consumer price index (CPI)
  • Nike earnings

Wednesday, March 22

  • NZD: New Zealand 1Q consumer confidence
  • GBP: UK February CPI
  • USD: Fed rate decision

Thursday, March 23

  • CHF: Swiss National Bank rate decision
  • NOK: Norges Bank rate decision
  • GBP: Bank of England rate decision
  • USD: US weekly jobless claims

Friday, March 24

  • JPY: Japan February CPI
  • EUR: Eurozone January manufacturing and services PMIs
  • GBP: UK February retail sales; March PMIs, consumer confidence



Typically, in a week like the upcoming one, we'd be focusing on the US Federal Reserve (Fed) and the Bank of England (BOE), being the central banks of larger economies compared to the Swiss National Bank (SNB).

However, given the recent Credit Suisse crisis, the SNB has muscled its way into the spotlight, along with its currency, the Swiss Franc (CHF).


Here are 3 reasons to watch how USDCHF fares next week:

1) Swiss National Bank’s take on Credit Suisse crisis

The SNB carries out its monetary policy assessment just 4 times per year, half the number of policy meetings that the Fed has scheduled for 2023.

For the upcoming SNB meeting, markets had expected another hike of 50-basis points (bps), following the central bank’s hikes last year totalling 175bps.

Yet, the Credit Suisse saga that’s unfolding in the SNB’s own backyard, noting the irony of Switzerland’s long-held stature as a banking haven, adds a dramatic dimension to the press conference by SNB President Thomas Jordan next week.

And the Swiss Franc (CHF) may react less to the actual adjustment to the policy rate, but rather any commentary that President Jordan may offer surrounding the Credit Suisse crisis.

Note how CHF weakened against every single one of its G10 peers as the CS drama played out across global financial markets this week:

The stakes are high for the SNB.

After all, CS is Switzerland's second biggest lender, with the bank's assets equal to about 70% of the country's GDP!

Furthermore, the Bank of International Settlements has listed Credit Suisse as one of the top-30 banks most important to the global financial system.


Credit Suisse's importance prompted the SNB to step in and extend a US$ 54 billion (CHF 50 billion) credit line to the embattled bank to help shore up liquidity.

Also, following the central bank’s previous policy meeting in December 2022, the SNB President had deviated from the norm of not commenting on individual commercial banks and publicly supported Credit Suisse’s ongoing 3-year transformation to its business.

Having already extended verbal, written, and liquidity support, should the SNB even hint that it has to step in with further aid for CS, that may actually have the unintended effect of weakening the Swiss Franc on the notion that Credit Suisse’s turmoil is not yet over.


2) Fed’s dilemma between inflation and financial stability

Last week, markets had assigned a 70% chance that the Fed would trigger a 50-bps hike at its March meeting.

That would reassert its aggressiveness in its fight against inflation after having downshifted to a relatively smaller 25-bps hike at its previous policy meeting held on January 31 - February 1st, 2023.

But that calculus has been altered dramatically, as the collapse of Silicon Valley Bank continues reverberating across the US banking sector.

With the Fed having to shore up financial stability in its own backyard, markets believe policymakers cannot follow through with yet another larger rate hike, which are intended to incur further damage to the economy so as to subdue US inflation that’s still stubbornly elevated.

Hence, at the time of writing, markets have whittled down their forecasts to an 81% chance of a 25-bps hike by the Fed next week.

Similar to the SNB (and the ECB’s press conference this week), concerns surrounding financial stability risks are set to dominate Fed Chair Powell’s session with the media after the FOMC meeting concludes.

Should markets even get a whiff that Chair Powell and his colleagues are growing more concerned about potential contagion risks and are refusing the shut the door on winding down, or perhaps even an abrupt pause, to the Fed’s rate-hike cycle, such policy clues may weaken the US dollar and drag USDCHF lower.


3) USDCHF’s one-week implied volatility surges to fresh year-to-date high

All of the above is clearly not lost on markets, prompting a surge in the expected volatility for USDCHF over the next one-week period.


With the banking woes of late leaving policymakers, both the Fed and the SNB, between a rock and a hard place:

  • Do these central bankers keep focusing on their ongoing battle against inflation and persist with a 50-bps hike, risking further damage to its financial sector that’s still raw and vulnerable?
  • Or do the likes of the SNB and the Fed opt for a relatively smaller 25-bps hike to preserve the still-fragile sentiment surrounding banks, but risk letting inflation rage further?


With so much at stake, markets are ready to react to the slightest clues.

The central bank that shows the greater concern for its own banking sector, should see its currency weaken further.

  • Should fears surrounding Credit Suisse spike anew over the coming week, that could even launch USDCHF above its 100-day simple moving average.
  • On the other hand, if yet another US bank is added to this infamous list which already features the likes of Silicon Valley Bank, Signature Bank, and First Republic, fresh alarms surrounding the US banking sector may drag USDCHF back into sub-0.920 domain.


Key levels for USDCHF


  • 0.93393: previous cycle high
  • 100-day SMA
  • 0.9440 region: early-March peaks



  • 50-day SMA
  • 0.920 psychologically-important region
  • 0.905 – 0.907: year-to-date lows



From current levels, Bloomberg’s FX model points to a 73% chance that USDCHF will trade within the 0.9088 to 0.9420 range over the next week.



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