News: FOREX-Swiss franc surges on SNB surprise rate hike, sterling tumbles before BoE

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    The Swiss franc jumped on Thursday against the euro and the dollar after the Swiss National Bank raised its policy interest rate for the first time in 15 years.

    The SNB joined other central banks in tightening monetary policy to fight resurgent inflation, increasing its policy rate to -0.25% from the -0.75% level it has deployed since 2015.

    It was the SNB's first rate hike since September 2007. The Swiss franc EURCHF=EBS surged 2% higher against the euro to 1.0180. Against the U.S. dollar CHF=EBS , the franc rose 1.3% to 0.9825 by 0800 GMT.

    "It's telling of the general environment that even the previous doves are now worried about inflation," said Jan Von Gerich, chief analyst at Nordea.

    "The big picture remains that central banks are worried about being behind the curve and need to catch up."

    BOE NEXT Sterling fell ahead of Thursday's Bank of England meeting as global risk sentiment worsened. The central bank is expected to raise borrowing costs for the fifth time since December despite worries about a sharp slowdown in the British economy.

    Sterling GBP=D3 slid 1% lower to $1.2059 in early London trading, not far from a two-year low touched this week. It was last down 0.64% at $1.2098 ahead of the BoE meeting, which is expected to bring at least a 25 bp hike, with swaps pricing implying about an 80% chance of a 50 bp hike. BOEWATCH

    "The ongoing acceleration in UK inflation may encourage the BoE to deliver a hawkish message and further support sterling," said Commonwealth Bank of Australia analyst Carol Kong.

    "Nevertheless, we expect markets will scale back their expectations for BoE rate hikes, which will eventually weigh on sterling."

    Traders will also be closely watching several speakers from the European Central Bank after the ECB promised to control borrowing costs for the euro zone's periphery countries after an emergency meeting on Wednesday.

    Versus the dollar, the euro fell 0.45% to $1.04015, not far from a one-month low touched on Wednesday.

    The U.S. dollar rose against a basket of peers, nearing a 20-year high touched before the U.S. Federal Reserve upped borrowing costs on Wednesday by the most since 1994.

    Markets had anticipated the Fed's 75 basis point hike and priced in several more after a surprisingly hot inflation reading last week. But the dollar lurched lower after Fed Chairman Jerome Powell's news conference.

    It bounced back on Thursday with the dollar index =USD rising 0.5% to 105.30, nearing a two-decade high of 105.79 hit on Wednesday.

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