Nomura’s European economics team expects the SNB to keep emphasising an elevated willingness to intervene in FX markets, despite recent CHF depreciation against EUR. They see intervention as a key tool to counter disinflationary pressures and Iran war risks, and anticipate Q1 data will likely reveal increased operations against previous Swiss Franc strength.

Franc dynamics tied to SNB stance

"Since the last meeting, speeches from SNB policymakers have emphasised the Bank’s increased willingness to intervene in FX markets. These statements include Chairman Schlegel (on 3 June) saying that the “Iran war could increase pressure on [the] franc” and the SNB has “increased willingness to intervene in FX”. Antoine Martin, Vice Chairman of the Governing Board, also noted on 21 May that the SNB has elevated willingness to intervene in FX (sources: Bloomberg)."

"Although CHF has depreciated against EUR since March, in light of the continued communication highlighting the increased willingness to intervene and ongoing uncertainty from the Iran war, we expect the statement at the June meeting to again express increased willingness to intervene in the FX market. At the end of the month, the SNB will release data on FX interventions in Q1, which we believe will likely show increased intervention against CHF strength in the quarter."

"We think the appreciation of CHF over the past several months is likely exerting downward price pressure on some goods imports, including clothing imports. The SNB also emphasised at its last meeting that it believes the CHF’s appreciation will counteract possible second-round inflation effects of the rise in energy prices, so its medium-term inflation forecast remained similar to prior to the Iran war in March."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)