We think cuts in June and September now look likely. That would take the policy rate in Switzerland back to 1%, with another move potentially lowering it to 0.75%.

The EUR-CHF rate gap – a key driver of EUR/CHF – is set to prove supportive for the pair beyond the short term. We suspect markets are wrong in pricing in more than 75 bps of easing by the ECB this year, while the SNB rate expectations can face further dovish repricing.

Crucially, the SNB’s policy statement made two references to the strength of the Franc in real terms, meaning the FX intervention tool can now be used to weaken the currency. 

Things may quiet down in EUR/CHF now, especially as markets may incline to price in more cuts by the ECB, but selling the rally in the pair remains risky, and a gradual climb towards parity is a more likely outlook.