Remarks from Commerzbank on EUR/CHF

  • EUR/CHF once again did not manage to jump above the 1.1779 mark on Friday, a level that already capped exchange rates in December
  • At 0.9% yoy the core inflation rate in the euro zone was disappointingly weak and that caused EUR appreciation pressure to evaporate for now
  • As long as the core rate of inflation does not rise on a sustainable basis, ECB rate hikes remain dreams of the future
  • And as long as that is the case the Swiss Na tional Bank (SNB) will not consider reducing the negative interest rate of -0.75% as things stand presently
  • Swiss inflation ... at a multi-annual high at 0.8%, but is by no means so stable above zero that the SNB is likely to risk a less expansionary monetary policy. As soon as it signals tightening steps without the ECB having taken steps before it, the franc is likely to appreciate significantly which would put notable pressure on the Swiss inflation rate. That means for now it is the EUR side of things and risk sentiment that dominate in the EUR-CHF exchange rate.

Bolding is mine. Yesterday we got Swiss inflation data, unchanged on the month and at +0.8% y/y.

The Commerz note was written before the data was published, but given the result eyes remain on inflation in Switzerland in the months ahead.