EUR/CHF pulls back below 0.9400 despite the SNB's rate cut

• The SNB cut interest rates by 25 basis points to 0% as widely expected.
• The EUR/USD eased after the decision, although it remains within previous ranges.
• Deflationary pressures have boosted speculation that the SNB might revive negative interest rates.

Buy the rumour, sell the fact for the EUR/CHF on Wednesday, as the pair has reacted lower to the Swiss National Bank's decision to cut its benchmark rate by 25 basis points, to 0% after its monetary policy meeting.

The EUR/CHF has pulled back from the 0.9420 area to levels right below the 0.9400 level. From a wider perspective, however, the pair remains trading sideways, in the upper range of the last two months' horizontal channel, from 0.9300 to 0.9440.

A dovish SNB is weighing on the Swiss Franc

The SNB has been one of the most dovish among the major central banks, slashing rates by 175 basis points since March 2024, forced by deflationary pressures in the Swiss economy.

Consumer prices fell into negative levels in May for the first time since 2021. The yearly CPI contracted at a 0.1% pace, and boosted speculation that the SNB might be the first major central bank to revive negative interest rates.

The dovish SNB policy is offsetting the positive impact of risk aversion in the safe-haven CHF, allowing the Euro to appreciate about 0.8% in the last four weeks. The pair, however, is nearing a key area at the mentioned 0.9445, which is likely to pose a significant challenge for bulls, especially if geopolitical tensions remain high.