Key Moments
- The Swiss Franc has depreciated since the start of the war in Iran, despite its traditional safe-haven status.
- Exceptionally low Swiss inflation at 0.1% year-over-year is seen as giving the SNB room to avoid aggressive tightening.
- Commerzbank’s Thu Lan Nguyen questions whether SNB verbal intervention threats can stop EUR/CHF from revisiting 0.90 if the conflict intensifies.
Franc Weakens Despite Crisis Environment
Commerzbank strategist Thu Lan Nguyen notes that the Swiss Franc (CHF) has lost ground since the war in Iran began, a move that stands in contrast to its usual behavior in periods of geopolitical stress. She attributes part of this weakness to Switzerland’s exceptionally low inflation and the Swiss National Bank’s (SNB) ongoing signaling on currency intervention.
According to Nguyen, the current inflation backdrop in Switzerland reduces the urgency for the SNB to implement forceful monetary tightening, even in the event of renewed price pressures. This factor, combined with the central bank’s communication strategy, has contributed to the softer CHF performance.
SNB Signals on Intervention
Nguyen underscores that the SNB has continued to stress its willingness to act against excessive currency strength. She highlights recent remarks from an SNB official as an example of this stance.
“The Swiss franc is among the currencies that have lost ground since the outbreak of the war in Iran. On the one hand, this is certainly due to the fact that Switzerland, with an inflation rate of just 0.1% (year-over-year), is in a comparatively strong position to handle a surge in inflation without having to tighten monetary policy extremely.”
“On the other hand, the Swiss National Bank (SNB) continues to maintain a threatening stance regarding intervention. Just yesterday, Board member Petra Tschudin warned once again that the SNB stands ready to intervene against a strong franc.”
EUR/CHF Levels and Risk of a Return to 0.90
With EUR/CHF trading at higher levels again, Nguyen points out that the SNB’s intervention rhetoric does not currently pose an immediate constraint for the market. She, however, raises concerns about how durable this verbal approach might be if geopolitical tensions pick up once more.
“Of course, with the EUR-CHF exchange rate currently back at significantly higher levels, this does not pose an immediate threat. “
“However, it remains to be seen whether the verbal threat will be enough to prevent another test of the 0.90 mark should the Iran conflict escalate again.”
Market Context Summary
| Factor | Detail |
|---|---|
| Currency | Swiss Franc (CHF) |
| Key Pair | EUR/CHF |
| Swiss inflation rate | 0.1% year-over-year |
| Main concern | Whether SNB verbal intervention threats can prevent another test of the 0.90 level |
| Geopolitical driver | War in Iran |
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