The EUR/CHF pair settled below recent high of 0.9141, its strongest level since February 26th, in the wake of the European Central Bank’s and the Swiss National Bank’s policy decisions.
The ECB kept its main refinancing operations rate intact at 2.15% at its March 19th meeting, in line with market consensus.
And, the ECB deposit facility rate was kept at 2.00%.
The decision was framed against a backdrop of uncertainty around inflation and growth linked to joint military operations by the United States and Israel against Iran.
During the subsequent press conference, ECB President Christine Lagarde cautioned that the “increase in energy prices will drive inflation above 2% in the near term”.
Meanwhile, a Reuters report indicated that the ECB might consider discussing an increase in key borrowing costs in April and could move to raise rates in June if elevated energy prices persist. That report triggered a strong upward reaction in the Euro.
At the same time, the Swiss National Bank left its policy rate unchanged at 0% at its March meeting, as widely expected by markets.
Low inflation has given policy makers room to stay cautious. Consumer prices rose 0.1% year-on-year in February, showing limited pressure.
The SNB’s latest projections point to very weak inflation through 2027. This suggests that policy makers see little need for tighter policy.
Because of this outlook, expectations for rate hikes remain low. The central bank appears comfortable maintaining current settings.
The minor Forex pair gained 0.97% for the week.
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