Rabobank’s Senior FX Strategist Jane Foley highlights that despite resilient Swiss growth and firm PMI readings, very low inflation leaves little need for imminent SNB tightening. The central bank has signalled a heightened willingness to intervene against Swiss Franc strength, especially while geopolitical risks from the Iran war persist. This stance, alongside low rates, has limited traditional safe-haven inflows into the Swiss Franc so far.

SNB policy and geopolitics shape Franc

“That said, Swiss CPI inflation remains very contained at 0.6% y/y for April for the headline measure and with the core registering a softer than expected 0.3% y/y last month.”

“At its last policy meeting in March, the SNB warned that inflation was likely to increase more strongly in the coming quarters because of the war in Iran.”

“However, the SNB made it very clear in March that its “willingness to intervene in the FX market has increased”.”

“Measured since the last trading day in February, the CHF is the third worst performing G10 currency.”

“Until there is clarity over a peace deal in the Iran war and confidence over a re-opening in the Strait of Hormuz, there is risk of another rush into perceived safe havens.”

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