CHF: How fast is too fast for the SNB? - Commerzbank

The Swiss franc benefited significantly from its safe-haven status after the announcement of the reciprocal US tariffs. However, the rapid appreciation is likely to be a thorn in the side of the SNB. As long as the appreciation does not continue at this pace, markets do not expect significant intervention. And as Trump has since backtracked on his tariffs, markets no longer expect any further significant appreciation, Commerzbank's FX analyst Michael Pfister notes.

SNB to swallow the pill of a stronger franc

"In the first few months of the year, the Swiss franc did not look particularly good. In particular, when the euro made a comeback on the back of the German fiscal package and was able to appreciate significantly, EUR/CHF went up quite a bit. Nevertheless, we have long argued that there is a strong case to be made for lower EUR/CHF levels. Following the US President's announcement of reciprocal tariffs, things moved very quickly: instead of trading at just under 0.96, EUR/CHF is now trading three cents lower, i.e. the franc has appreciated significantly."

"The strong appreciation of the CHF is unlikely to please the SNB. Over the past year, it has repeatedly warned of the inflationary dangers of too strong a franc. A strong franc reduces imported inflation, which ultimately leads to lower price pressure for all goods. And since inflation in Switzerland is generally chronically low, the SNB pays particular attention to factors that could exacerbate this situation."

"We expect the Swiss franc to have some upside potential against the euro in the coming months. In our view, the euro euphoria surrounding the German fiscal package is somewhat overdone. The package is unlikely to be reflected in stronger German growth figures until next year. However, the unwinding of expectations is likely to be much slower than the recent CHF movement, which somewhat reduces the incentive for the SNB to respond with more FX interventions. As a result, we expect the SNB to swallow the pill of a stronger franc for the time being."