MUFG’s Lee Hardman reports that the Swiss Franc (CHF) continues to weaken versus the Euro, with EUR/CHF reaching new highs as widening yield differentials favour the Euro. Markets now price further European Central Bank (ECB) hikes, while Bloomberg reports suggest the Swiss National Bank (SNB) may keep rates at 0.00% until 2027. The SNB appears comfortable with the inflation outlook and stands ready to sell Swiss Francs only against excessive appreciation.

ECB-SNB divergence pressures Swiss franc

"The Swiss franc has continued to weaken against the EUR at the start of this week resulting in EUR/CHF hitting a fresh high overnight at 0.9332."

"The euro-zone rate market has moved to price in a higher probability of the ECB delivering two further hikes this year."

"Plans for at least one more hike in September appears to be in place with Bloomberg having reported that ECB officials are prepared to raise rates again in September unless the inflation outlook improves markedly."

"In contrast, Bloomberg has reported this week that the SNB is set to keep rates on hold at 0.00% until the end of 2027 according to people familiar with the thinking inside the central bank."

"At the same time, the SNB continues to reiterate that it has an increased willingness to intervene to sell the Swiss franc to counter rapid and excessive appreciation which is currently not needed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)