Swiss Franc remains on the defensive despite geopolitical tensions
The Swiss Franc (CHF) is experiencing marked losses against both the Euro (EUR) and the US Dollar (USD) as the American session draws to a close on Thursday.
Focus remains on the Middle East, energy prices, and the SNB
The ongoing depreciation of the Swiss currency has pushed USD/CHF to fresh multi-day highs around 0.7850, while EUR/CHF has managed to reverse two consecutive days of losses, advancing modestly to the 0.9040 zone.
In the current flight-to-safety context, the Franc appears to be struggling against the Greenback. However, it is widely anticipated that it will regain demand if the geopolitical landscape deteriorates further, which, regrettably, seems quite likely.
Another factor supporting the CHF is expected to arise from the energy sector, as both crude oil and gas prices continue their intense rally unabated, raising doubts about any prospects of alleviating inflationary pressures on both sides of the Atlantic.
In the meantime, the possibility of intervention by the Swiss National Bank (SNB) should caution investors against pursuing further appreciation of the Franc, particularly in the current climate of safe haven demand.
Tech levels to watch
The surpass of the March ceiling at 0.7878 (March 3) could motivate USD/CHF to face its interim 100-day SMA at 0.7899, seconded by the always relevant 200-day SMA at 0.7959. In contrast, once the March base at 0.7668 (March 2) is breached, the pair could shift its attention to the February trough at 0.7628 (February 10) and then the 2026 valley at 0.7601 (January 28).
Regarding EUR/CHF, next on the downside comes the all-time low at 0.8980 (March 9).
SNB FAQs
The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.
The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.
The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.
Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
