Swiss inflation surprises on the upside – Franc benefits. Economists at Commerzbank note that for the EUR/CHF pair, the lower end remains attractive for the time being.

SNB tolerance for CHF weakness will become increasingly smaller the higher inflation rises

“The Franc is currently benefitting from the fact that the Swiss National Bank (SNB) is assumed to retain considerable firepower at this stage. Rate expectations have risen over the past few days and the CHF has been able to benefit from the development.”

“The risk of possible SNB interventions to strengthen the Franc also plays an important part. The SNB communicated that it would continue to sell foreign currency in the future if this was necessary from a monetary policy point of view, i.e. if a weak CHF is putting upside pressure on inflation. Today’s producer and import prices are likely to illustrate that this is not currently the case.” 

“Any FX trader is nonetheless likely to be aware that SNB tolerance for CHF weakness will become increasingly smaller the higher inflation rises. For EUR/CHF that means that for now, the lower end remains attractive.”