OCBC’s FX Strategist Sim Moh Siong highlights a weaker Swiss Franc as EUR/CHF drifts higher from 0.91 support, reflecting widening rate disadvantages and the SNB’s active resistance to currency strength. With inflation subdued and sensitivity to CHF appreciation high, OCBC expects the SNB to stay on hold, while a June population-cap referendum could briefly add FX volatility.

SNB stance weighs on Swiss Franc

"EUR/CHF has drifted higher this week after opening near the 0.91 support level. CHF is under pressure as its rate disadvantage widens versus other developed markets."

"Since the start of the US-Iran conflict, CHF’s safe-haven appeal has weakened. The SNB’s shift towards more active intervention stance against currency strength is dampening haven demand during risk-off episodes."

"Swiss inflation remained subdued in May. CPI held at 0.6% YoY, while imported prices fell on the month despite higher global energy costs."

"Earlier CHF appreciation continues to weigh on import prices. Markets price around a 50% chance of a rate hike by year-end. We disagree. With inflation low and sensitivity to CHF strength high, the SNB is likely to stay on hold. "

"The 14 June referendum to cap Switzerland’s population at 10 million by 2050 has limited near-term macro impact. However, a ‘yes’ vote could trigger short-term FX volatility."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)