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03/06/24
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CHF Climbs Ahead of Swiss Inflation
On Monday, the Swiss franc managed to extend its gains, and USD/CHF traded at about 0.8961, down 0.68% in the North American session.
Last week, the Swiss franc posted its strongest weekly gain of this year and rose 1.35%. On Thursday, the currency rose more than 1% after Swiss National Bank President Jordan indicated that the central bank may intervene in the currency markets to curb inflation.
Jordan’s comments boosted the Swiss currency, which has declined in 2024. Despite last week’s strong gains, the Swiss franc has however dropped 7.1% versus the US dollar.
The Swiss franc dropped after the Swiss National Bank in March cut interest rates unexpectedly. Although the weaker Swiss franc helped make Swiss exports more competitive on global markets, the currency’s sharp drop may have been too much as it is feeding inflation and fueling worries at the central bank.
The Swiss franc’s drop has had a strong effect on market expectations for a rate cut at the meeting on June 28. Swap markets priced in a 66% chance of a rate cut in early May, which has dropped to about 40%.
The SNB will not likely buy Swiss francs unless the currency continues dropping sharply, but last week’s rise shows how central bankers’ comments can cause sharp swings.
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