How fast is too fast for the SNB? - Commerzbank

The Swiss franc has emerged as a clear winner amidst the recent market turbulence following Donald Trump's tariff announcement, appreciating significantly against major currencies. However, the Swiss National Bank (SNB) faces challenges as the strong franc could weaken inflation and harm the economy, Commerzbank's FX analyst Michael Pfister notes.

Swiss franc surges amid tariff uncertainty

"Amid the huge market moves following Donald Trump's tariff announcement, one clear winner has emerged: the Swiss franc. Since last week, the franc has gained more than 5% against the US dollar (and thus also appreciated against the other G10 currencies), and in EUR/CHF we are now trading almost 3 cents lower than a week ago. We have to pat ourselves on the back a little at this point - our forecast of a stronger franc no longer seems so far-fetched."

"However, we should not pat ourselves on the back just yet. There is a big problem: the SNB is unlikely to be happy that the franc has appreciated so much in such a short time. For almost a year now, it has repeatedly stressed the risk of inflation weakening too much and even falling into deflationary territory. And in this context, a strong franc is particularly unwelcome as it further reduces inflationary pressures, especially for a small open economy like Switzerland."

"However, it probably cannot stand by and watch the CHF appreciate forever. If it goes much further - or the tempo accelerates - the SNB is likely to take countermeasures. And since the scope for rate cuts is limited, (more pronounced) interventions are likely again, in contrast to last year. However, given the current situation in the White House, the warning shots are likely to be fewer than usual. I would therefore not exaggerate the strength of the franc."