The SNB hiked its policy rates by 25 bps at its June meeting, which was in line with the consensus forecast among economists but below the pricing of the STIR market. 

We interpret the SNB's rate hike decision and statement as dovish and target 1.0200 in EUR/CHF for the end of Q3. The recent strength in the real Swiss TWI and concerns about financial stability risks in the banking/mortgage sector might be the reasons for the more cautious stance. 

Our main argument is that widening rate differentials vis-a-vis the Franc's major peers could lead to capital outflows and weaken the Swiss Franc. The risk is a resurgence of Swiss inflation and a more hawkish SNB as a result.