Widening policy rate differential with ECB suggests CHF weakness ahead, in the opinion of economists at CIBC Capital Markets.

SNB to remain potentially activist in the FX space

“Beyond the prospect of ongoing monetary tightening, we can expect the central bank to remain potentially activist in the FX space. However, we would expect any activity to be commensurate with the pursuance of the goal of price stability rather than attempting to reduce the balance sheet.” 

“We expect additional SNB policy activity, resulting in a 1.75% terminal rate. However, in view of the assumption of the ECB hiking rates towards 3.50%, the widening in nominal rate differential favours a modest uptrend in EUR/CHF.” 

“Q2 2023: 1.00 | Q3 2023: 1.01 (EUR/CHF)”