Stronger Inflation Spurs Hawkish SNB, Firmer Franc

Key Moments

Inflation Surprise Pressures EUR/CHF

Chris Turner at ING reports that EUR/CHF moved lower after Swiss inflation came in at 1.5% year-on-year, a result that caught markets off guard. The October reading has prompted market participants to question whether earlier expectations that the Swiss National Bank (SNB) could refrain from tightening throughout 2027 will hold.

Turner notes that this inflation outcome has challenged prior assumptions based on claims from sources suggesting the SNB might avoid additional tightening over that period. He also points out that further clarity may emerge when SNB’s Martin Schlegel speaks at an SNB watchers conference, where investors will look for signals on the policy outlook.

Market Focus on SNB Policy Signals

“EUR/CHF briefly traded sharply lower yesterday on the back of a surprisingly high October inflation print of 1.5% year-on-year. That raises questions about whether the Swiss National Bank can avoid tightening throughout the whole of 2027, which sources had claimed. We should hear a little more on this from SNB’s Martin Schlegel tomorrow, who speaks at an SNB watchers conference.”

Hawkish Bias Supports the Swiss Franc

Turner emphasizes that a more hawkish stance from the SNB tends to be straightforwardly supportive for the Swiss franc. He recalls that in 2023 the central bank deliberately pushed the franc higher and conducted foreign exchange sales as part of its policy approach.

“A more hawkish SNB is quite a clean positive for the Swiss franc. Traders will remember 2023, when the SNB actively drove the franc stronger and sold FX as part of its tightening toolkit. Expect to see even more interest in the Swiss franc over the coming months, with downside risks to EUR/CHF forecasts.”

EUR/CHF Outlook and Risk Skew

According to Turner, the combination of the inflation surprise and the potential for a more assertive SNB policy stance is likely to draw additional investor attention to the Swiss franc. He warns that, in this environment, the risks to current EUR/CHF forecasts are tilted to the downside over the coming months.