Commerzbank’s Michael Pfister asserts that the Swiss National Bank (SNB) is now more concerned about the strength of the Swiss franc than about inflation, given that Swiss inflation remains low and the shocks experienced in 2022 and 2023 are unlikely to repeat [1]. Market pricing currently implies almost one full interest rate hike by the end of the year, but Pfister suggests the SNB may prioritize foreign exchange stability over further tightening [1].
Recent movements in the EUR/CHF currency pair show a gradual upward trend, with the dip below the 0.90 level appearing to be only a brief excursion [1]. Since the onset of the war, the franc has appreciated by just half a cent against the euro and has lost significant ground against the US dollar [1].
The possibility of SNB intervention in the foreign exchange market has become a topic of debate, especially given the unusual recent threat of intervention [1]. However, Commerzbank suspects the SNB will likely refrain from making clear statements about its intentions, possibly citing upside inflation risks, while also noting the SNB's reputation for surprising the market [1].
CONCLUSION
The SNB appears to be shifting its focus from inflation to managing the strength of the franc, with EUR/CHF trending higher and intervention risks debated. Market expectations of a rate hike remain, but FX stability may take precedence. The SNB's next moves are uncertain, leaving the market alert for potential surprises.