Last week, demand for safety even took EUR/CHF close to its all-time low. The strength of the Franc poses a dilemma for the Swiss National Bank (SNB). A stronger Franc ensures lower imported inflation, while at the same time it makes exports more expensive for domestic businesses. Little wonder, then, that Swiss exporters last week called on the SNB to counteract the appreciation, Commerzbank’s FX analyst Michael Pfister notes.

Rate cuts are likely to remain the instrument of choice

“The Franc has been appreciating steadily against the Euro for many years. Basically, the SNB can react by cutting interest rates or by buying foreign currencies and selling Swiss Francs. The only option for the time being is to intervene until the next meeting. Some commentators therefore claimed to have seen SNB interventions last week, citing the rise in sight deposits and the CHF movement.”