Economists at Danske Bank continue to see a stronger CHF versus EUR. Notably, this does not imply a large risk-off event but rather, continued high inflation differentials amid a push towards a-cyclicals will likely be enough.

SNB is officially sidelined

“Whereas headline equities and especially small caps have been wobbling or outright retracing, the defensive sectors such as healthcare, utilities and staples have shown relative and outright strength. A push towards defensives, though with headline indices going higher, would likely complement our view for a stronger CHF over coming quarters.”

“With SNB lifting its short-term inflation forecast to 1.0% in 2022 (from 0.7%) this leaves room for the SNB to allow for a stronger nominal CHF to counteract the rising inflation pressures, which supports our narrative of a SNB refraining from intervention at current levels. This is further reinforced by strong Swiss CPI for December at 1.5% YoY.”