Rabobank’s Senior FX Strategist Jane Foley discusses recent Swiss inflation data and implications for the Swiss Franc. Foley notes that low Swiss CPI reduces pressure on the SNB to cut rates below zero, while credible FX intervention and safe-haven demand should keep CHF firm. They still expect another dip toward the EUR/CHF 0.90 area in coming months.

SNB policy, FX threat and safe haven

"Since Swiss March CPI inflation has edged away from the zero level, there is less pressure on the SNB to consider moving its policy rate below zero."

"The recent spike in market expectations regarding ECB rate hike risks will also be welcome since the widening in short-term interest rates in favour of the EUR should, in theory, offer support to EUR/CHF."

"That said, in our view, is likely that the threat of FX intervention had more leverage in pushing EUR/CHF away from its recent lows last month."

"Despite the reprieve offered by slightly firmer Swiss CPI inflation data and the expectations of ECB rate hikes, we see scope for the CHF to remain firm going forward and see another dip towards the EUR/CHF 0.90 area as likely in the coming months."

"Near-term, we would expect safe-haven and diversification flows to keep the CHF well supported."

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