Swiss Franc: Is the risk of a hawkish SNB lending support to the franc? – ING

The Swiss Franc is likely to attract greater interest in the coming months, leaving existing EUR/CHF forecasts exposed to downside risks, according to ING’s Chris Turner. He notes that EUR/CHF declined after Swiss inflation delivered an upside surprise at 1.5% year-on-year, casting doubt on whether the Swiss National Bank can avoid tightening through 2027. Turner also points to the SNB’s 2023 approach of selling FX to strengthen the Swiss Franc.

Does the Inflation Surprise Put SNB Tightening Back in Focus?

"EUR/CHF briefly traded sharply lower yesterday on the back of a surprisingly high October inflation print of 1.5% year-on-year. That raises questions about whether the Swiss National Bank can avoid tightening throughout the whole of 2027, which sources had claimed. We should hear a little more on this from SNB's Martin Schlegel tomorrow, who speaks at an SNB watchers conference."

"A more hawkish SNB is quite a clean positive for the Swiss franc. Traders will remember 2023, when the SNB actively drove the franc stronger and sold FX as part of its tightening toolkit. Expect to see even more interest in the Swiss franc over the coming months, with downside risks to EUR/CHF forecasts."

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