Key Moments
- EUR/CHF has reached a new high at 0.9332 as the Swiss Franc continues to weaken versus the Euro.
- Markets have moved to price in a higher probability of two additional European Central Bank rate hikes this year.
- Bloomberg reports indicate the Swiss National Bank may keep its policy rate at 0.00% until the end of 2027 and stands ready to counter only rapid, excessive CHF appreciation.
Policy Gap Drives EUR/CHF Higher
MUFG strategist Lee Hardman notes that the Swiss Franc (CHF) continues to lose ground against the Euro, with EUR/CHF advancing to new highs as investors respond to widening yield differentials in favor of the Euro. According to his assessment, market pricing now reflects expectations for additional monetary tightening by the European Central Bank (ECB), while the Swiss National Bank (SNB) is seen remaining on hold.
The divergence in policy outlooks has reinforced selling pressure on the Swiss Franc, as investors position for relatively higher returns on Euro-denominated assets compared with Swiss assets.
Market Pricing for ECB and SNB
Hardman highlights that moves in the euro-zone interest rate market have been important in driving the latest leg higher in EUR/CHF. Market participants are adjusting to the prospect that the ECB will continue raising rates, while reports suggest the SNB may keep its benchmark rate unchanged at 0.00% for an extended period.
| Central Bank | Current Market Expectation | Reported Source/Context |
|---|---|---|
| ECB | Higher probability of two further hikes this year; at least one more hike in September appears to be in place | Euro-zone rate market pricing; Bloomberg report on ECB officials’ stance |
| SNB | Policy rate to remain at 0.00% until the end of 2027 | Bloomberg report citing people familiar with thinking inside the central bank |
Direct Commentary From MUFG and Reported Sources
“The Swiss franc has continued to weaken against the EUR at the start of this week resulting in EUR/CHF hitting a fresh high overnight at 0.9332.”
“The euro-zone rate market has moved to price in a higher probability of the ECB delivering two further hikes this year.”
“Plans for at least one more hike in September appears to be in place with Bloomberg having reported that ECB officials are prepared to raise rates again in September unless the inflation outlook improves markedly.”
“In contrast, Bloomberg has reported this week that the SNB is set to keep rates on hold at 0.00% until the end of 2027 according to people familiar with the thinking inside the central bank.”
“At the same time, the SNB continues to reiterate that it has an increased willingness to intervene to sell the Swiss franc to counter rapid and excessive appreciation which is currently not needed.”
SNB’s Stance on Intervention and Inflation
The SNB is described as being comfortable with the current inflation outlook and, according to the commentary, is focused on resisting sharp, disorderly strength in the Swiss Franc rather than its present weakness. The central bank has reiterated that it is prepared to intervene by selling Swiss Francs to curb “rapid and excessive appreciation,” but such action is currently viewed as unnecessary.
This asymmetric intervention bias, combined with expectations that the policy rate will remain at 0.00% until the end of 2027, reinforces the current environment in which the Euro is supported relative to the Swiss Franc.
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