The Swiss National Bank (SNB) hiked its policy rate by 75 bps, bringing the policy rate to positive territory. It would seem that this was still not enough for the market as the franc weakened. However, economists at Commerzbank expect CHF to remain bid.

Goodbye negative rates

“The SNB has upped the pace on its monetary policy tightening and hiked its key rate by 75 bps to 0.5% – and thus waved goodbye to almost 8 years of negative interest rates.”

“The Swiss franc eased following the decision. Clearly, there had been a number of market participants who had expected a more significant rate step. The fact that the statement and comments by SNB governor Thomas Jordan were not particularly hawkish probably did not help either.”

“The disappointment on the market might put further depreciation pressure on the franc, but the SNB once again confirmed yesterday that it would consider selling foreign currency reserves if the franc were to depreciate. A weak franc would increase the pressure on (imported) prices. The market is therefore likely to be cautious in this respect.”

“The environment is likely to remain difficult for EUR. I, therefore, think that external factors such as the war in Ukraine, a looming energy crisis and economic concerns will quickly gain the upper hand again, with the franc principally remaining in demand.”