The franc has weakened after Switzerland became the first developed economy to cut interest rates this cycle, underscoring investors’ view that global rate cuts are coming soon and lifting shares around the world to record highs.

Gold prices and share benchmarks in Japan and Europe had already followed the S&P 500 to record peaks earlier on Thursday after the Federal Reserve indicated it would stick with its plans to cut interest rates in 2024.

The Bank of England wraps up a bumper week for global central banks later in the day but is expected to keep rates steady.

The Swiss National Bank cut its main interest rate by 25 basis points to 1.5 per cent, a surprise move that caused the currency to weaken.

The euro rose by as much as 1.2 per cent to 0.978, its highest since July 2023, and the dollar gained about one per cent to 0.8963 francs.

The Swiss benchmark index was up one per cent outperforming a 0.6 per cent gain in Europe’s STOXX 600 index, though the broad European benchmark is already at record highs. Swiss bond yields fell.

“We’ve watched with great interest Powell’s speech and the SNB today, and it broadly validates the narrative that, although we had a bit of heat in some inflation prints and services inflation, overall central banks are in a relatively comfortable spot,” said Samy Chaar, chief economist at Lombard Odier.

“The area where it was most comfortable is Switzerland because inflation is constrained, and let’s keep in mind they had to revise significantly down their inflation forecast,” he said, referring to the Swiss central bank.

US Federal Reserve chair Jerome Powell said on Wednesday recent high inflation readings had not changed the underlying “story” of slowly easing price pressures as the central bank stayed on track for three interest rate cuts in 2024 and affirmed that solid economic growth would continue.

The Fed left US rates on hold between 5.25 per cent and 5.5 per cent on Wednesday, as expected, and market pricing reflects expectations the Fed and the European Central Bank will start cutting rates at their June meetings.

US S&P 500 futures were up 0.3 per cent pointing to further gains on Thursday after the benchmark hit a record high on Wednesday.

Earlier, Japan’s Nikkei and Taiwan weighted index each climbed two per cent to record levels.

US Treasuries rallied on Wednesday before steadying with two-year yields last 4.583 per cent and 10-year yields at 4.235 per cent.

European bonds also rallied, with Germany’s 10-year yield down four basis points at 2.39 per cent.

Lower yields also helped non-yielding gold rise to a fresh record high of $US2,222.39 an ounce, and was last trading just below that, up 0.8 per cent.

In foreign exchange markets, the dollar dipped on prospects of US rate cuts before rebounding, though that bout of weakness briefly helped Japan’s yen recover from near multi-decade lows to 150.27 per dollar.

The yen was last at 151.1 per dollar, flat on the day, with the euro down 0.18 per cent at $US1.0902.

The pound was steady at $US1.2275 before a Bank of England meeting, at which the central bank looks set to keep its cards close to its chest on Thursday and not speed up its progress towards cutting interest rates.

Brent crude futures, up 5.6 per cent in little more than a week on supply concerns were steady at $US85.82 a barrel.

This post was originally published on Michael West.