CHF: Strength tests SNB tolerance – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong note that recent equity market turbulence has coincided with further Swiss Franc gains, with EUR/CHF consolidating well below 0.92. The bank warns that persistent CHF appreciation raises the risk of inflation undershooting the Swiss National Bank’s forecasts and could eventually challenge its tolerance for currency strength, potentially prompting a softer policy stance similar to recent Riksbank concerns over SEK.

Franc gains raise policy dilemma

"Last week's equity market turbulence coincided with further gains for the CHF, which is consolidating well below 0.92 in EURCHF."

"Further CHF gains raise the risk of additional downside surprises relative to the SNB’s inflation forecasts, even as last week's CPI was in line with the 0.1% YoY 1Q26 projection."

"This could potentially challenge the SNB’s recent tolerance for currency appreciation, even if the bar for returning to negative rates remains high."

"Dovish Riksbank minutes—highlighting SEK strength as a downside inflation risk—underscore the possibility that the SNB could also soften its stance if persistent CHF appreciation leads to further inflation undershoots."

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