Did we forget CHF?
With the sudden pivot by the Fed in mid-December, it has been easy to marginalise otherwise high salience events. One such largely overlooked development has been within Switzerland and its Franc. The Swissy has been a key currency as it has been one of those major currencies undertaking a program of FX intervention. Having now sold approximately 100bn Francs worth of FX reserves in favour of the local currency, the programme has been far from insignificant for FX flows. Now that demand for the Franc at the central bank level has disappeared, may there be room for one of the world’s preeminent safe haven currencies to depreciate.
Already since the decision we have seen many CHF crosses display a weaker Franc. Perhaps most notably has been EURCHF gaining in the aftermath of a dual ECB & SNB decision day. Looking at SNB inflation forecasts shows one conclusive outcome: expectations are that the relatively most spike inflation has been dealt with. Accordingly, policy normalisation is the prescribed policy within which FX interventions have little place.
With the central bank confirming to further such interventions are no longer on the table and the persuasion towards the sale of FX reserve has concluded, spot CHF prices could weaken. Such moves should be considered within the wider risk environment considering the Swissy’s role within the FX space. Rates in Switzerland are held at 1.75% and the bias will be towards rate cuts looking forward. Locally, inflation rates have remained sub-2% throughout the second half of this year. A push towards parity in EUR/CHF in 2024 may not be unthinkable against such a backdrop.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Dutch Division
Humphrey Percy
Wed 28 May 2025
Dutch Division The 4 way Dutch coalition looks in danger of falling apart over immigration due to Gert Wilders’ party and its brinkmanship over the Netherlands adopting his 10 point hardline immigration plan. Apart from being at odds with EU policy, it is opposed by the rest of the coalition as it involves deporting criminal […]
Daily Brief – Oil
Humphrey Percy
Fri 30 May 2025
Oil Following the US Manhattan court blocking TT or Trump Tariffs deeming them illegal, that was enough for the oil market to outweigh the OPEC+ output increases pencilled in for July, while it remained wary on potential new US sanctions on Russian oil. The result was that oil prices rose yesterday despite POTUS letting it be […]
Daily Brief – UK Borrowing
Humphrey Percy
Wed 21 May 2025
UK Borrowing Another one for the pub quiz in case it comes up: UK government borrowing stands at £2.8 trillion or £2800 billion. While you digest that number over the chicken in the basket if indeed you are already in the pub, it will have increased by the time you get to the end of this […]
