CHF: SNB Shifts FX Policy, Fueling Swiss Franc Surge

CHF: SNB FX policy to hit the franc

One of the strongest G10 FX performers over the festive period has been the Swiss franc. This has been a surprise to us and many in the market. At the last Swiss National Bank policy meeting (14 December), the SNB told us that it was no longer focusing on FX sales as part of its monetary policy toolkit. That may have been a recent change of mind for the central bank, however, given that in 3Q23, it had still sold CHF37bn of FX (data released 29 December). 

With the SNB now predicting inflation to be within range over the forecast horizon and having adopted a balanced risk assessment on inflation too, we doubt the SNB will be too happy with the 3% appreciation in the trade-weighted Swiss franc since its December meeting. We suspect the Bank is more likely to be an FX buyer than seller now and could easily see the SNB helping to nudge EUR/CHF back to the 0.95 area this month.