ING: The CHF
The Swiss National Bank held rates unchanged as expected but surprised markets on the dovish side yesterday. Despite the upward revision to its inflation projections, policymakers signalled no concerns about second-round effects, with the price shock still viewed as temporary. The SNB slightly tweaked its currency stance, removing the reference to an "increased willingness" to intervene while retaining its commitment to act when necessary. While this grabbed headlines, it is merely an adjustment reflecting the franc's recent weakness and does not imply any reluctance to intervene again should the currency appreciate. Market pricing remains too hawkish in our view, and that is what matters most for the Swiss franc. A hike is already fully priced in by March, but we still see few reasons to tighten policy in the foreseeable future. We think downside risks remain for the franc, with EUR/CHF potentially retesting the 0.9480 highs seen earlier in September. USD/CHF is probably where the upside potential is even greater at this point: an October hike from the Federal Reserve could prompt a rally to 0.85 in the near term.
The Swiss National Bank held rates unchanged as expected but surprised markets on the dovish side yesterday. Despite the upward revision to its inflation projections, policymakers signalled no concerns about second-round effects, with the price shock still viewed as temporary. The SNB slightly tweaked its currency stance, removing the reference to an "increased willingness" to intervene while retaining its commitment to act when necessary. While this grabbed headlines, it is merely an adjustment reflecting the franc's recent weakness and does not imply any reluctance to intervene again should the currency appreciate.
Market pricing remains too hawkish in our view, and that is what matters most for the Swiss franc. A hike is already fully priced in by March, but we still see few reasons to tighten policy in the foreseeable future. 9480 highs seen earlier in September. 85 in the near term.