In a wide-ranging magazine interview released yesterday, Swiss National Bank Governor Martin Schlegel seemed a little more tolerant of Swiss franc strength, ING's FX analyst Chris Turner notes.

Comments make a EUR/CHF retest of 0.9220 more likely

"This comes at a time when EUR/CHF is trading near 0.93 and USD/CHF under 0.80 – in other words, a time of a very strong nominal Swiss franc and a time when headline inflation is just 0.2% YoY. Two comments stood out in the interview."

"The first was that there was a high hurdle to reintroducing negative interest rates. The SNB policy rate is currently zero and the next meeting is on 25 September. The second was that 'considering prices, and thus costs for companies, are rising significantly faster in other countries, the real appreciation is not as significant as it appears at first glance.' Schlegel's comments are a little surprising given that the real Swiss franc is now on its early 2024 highs – a time when the SNB turned more dovish."

"We read the comments as the SNB being a little more relaxed about Swiss franc strength, a cut to negative rates being more distant and in a world where politics and debt sustainability are playing a greater role in FX markets, more encouraging of strategic positions long the Swiss franc. And the comments make a EUR/CHF retest of this year's lows at 0.9220 more likely."