The Swiss franc (CHF) has stayed relatively strong benefiting from hawkish policy comments. In the view of economists at Standard Chartered, Franc’s upside risk on SNB hawkishness is set to diminish over time.

CHF strength is a reflection of SNB's credibility

“We expect USD/CHF to trade largely in a narrow 0.95-1.00 range in coming quarters but weaken against the EUR as 2023 progresses, inflation declines and risk appetite is restored.”

“We doubt that intervening to push CHF stronger is the SNB’s preferred outcome but the threat is credible enough as long as inflation is a concern. For the time being investors will likely be reluctant to fight the SNB on CHF strength or use the CHF as the short leg against higher beta currencies.” 

“The risk for CHF appreciation is further SNB hawkishness, an unexpected deterioration in EU energy supplies, political tensions within the EU or easing of other geopolitical issues.”

“CHF is likely to remain among the lowest yielders globally so the downside risk would be any risk-positive shock that pushed yields higher globally, leaving Swiss rates behind. The other downside risk is a material improvement in EU energy security or deterioration in Switzerland’s.”