EUR/CHF: Too early for a sustainable jump above parity – Commerzbank

Swiss inflation for February surprised sharply to the upside. Thus, the Swiss National Bank (SNB) is unlikely to end its hiking cycle or allow a significant depreciation of the Franc, economists at Commerzbank report.

Inflation surprise from Switzerland

“Consumer price inflation climbed to 3.4% in February. Core inflation too continued to rise to 2.4% compared with 2.2% before.”

“In the light of recent inflation data the SNB is likely to hike its key rate once again with a renewed 50 bps step quite possible, accompanied by hawkish comments.”

“The SNB will probably still want to prevent the Franc from weakening, so as to avoid creating additional inflation pressure. So if the CHF were to depreciate, the SNB would probably intervene on the FX market.”

“Even if the ECB is supporting EUR with its hawkish comments the SNB is likely to do similarly and hike rates itself and deliver hawkish comments, as well as intervening against franc depreciation if necessary. That means that it is probably too early for a sustainable jump above parity in EUR/CHF.”