EUR/CHF steadies as Euro gains from ECB hawkish tone, Swiss disinflation deepens

• EUR/CHF trades around 0.9350 on Monday, rebounding modestly after hitting its lowest since August 1 last week.
• ECB’s Isabel Schnabel said rates are in a “good place,” flagged upside inflation risks, and noted euro area growth is set to exceed potential.
• Swiss Producer and Import Prices fell 0.6% MoM in August, while the annual rate slumped to -1.8%.

EUR/CHF kicks off the week on a positive note, attracting fresh buying interest after briefly falling to its lowest level since August 1 late last week. At the time of writing, the cross trades around 0.9350 on Monday, as the Euro draws some support from hawkish European Central Bank (ECB) commentary while fresh Swiss data highlight deepening disinflation.

ECB board member Isabel Schnabel struck a firm tone on Monday, underscoring that interest rates are in a “good place” and warning that upside risks to inflation dominate. She added that the pass-through from a stronger euro is likely to be limited, while highlighting that economic growth in the euro area is expected to exceed potential.

These remarks come in the wake of the ECB’s September monetary policy decision, where the Governing Council left all three key interest rates unchanged, keeping the deposit rate at 2.00%. Policymakers stressed that the current stance is appropriate and reiterated a meeting-by-meeting, data-dependent approach. The combination of stable rates and Schnabel’s hawkish lean reinforces the view that the easing phase of monetary policy is widely considered to be nearing its end, lending near-term support to the Euro.

On the Swiss side, the latest figures confirmed a persistent disinflationary trend. The Producer and Import Price Index fell 0.6% MoM in August, sharply missing expectations for a 0.1% rise and following a -0.2% decline in July. On an annual basis, prices dropped -1.8%, a steeper fall than July’s -0.9%. The weak data highlight that cost pressures in Switzerland are fading, keeping headline inflation well below the SNB’s 0-2% target band.

Despite subdued inflation, SNB Chairman Martin Schlegel recently stressed that the bar for reintroducing negative interest rates is high. In an interview earlier this month, he warned of the unwanted side effects of subzero rates, particularly for savers and pension funds, suggesting the central bank will be reluctant to cut below zero again.

Looking ahead, traders will keep a close eye on speeches from ECB President Christine Lagarde and Executive Board member José Luis Escrivá, both due later on Monday.