Swiss franc still under upward pressure - Natixis

The Swiss franc was globally firm against the euro in the first quarter of 2017 and after a low at 1.063, the EUR/CHF recovered to 1.07 at the end of the period notes research team at Natixis.

Key Quotes

“The firmness of the Swiss franc results from the massive interventions of the Swiss National Bank in the foreign exchange market to prevent the appreciation of its currency. The central bank’s currency reserves rose to a record level of CHF668bn in February. They increased by CHF25bn over the course of February in the face of what were probably significant capital inflows spurred by concerns over European political risks.”

“In coming months, the Swiss franc will remain under upward pressure given the still significant current account surplus (10% of GDP), the absence of capital outflows and the lingering European political risks (French elections, Brexit, etc.). Furthermore, the latest business surveys show an improvement and, especially, deflationary risks have subsided. Inflation has swung back into positive territory, reaching +0.6% year-on-year in February (when the consensus was for a 0.4% rise).”

“In such an environment, there will be less need for the Swiss National Bank to intervene so massively in the foreign exchange market. This is all the more the case in that the current policy of market intervention brings with it risks for inflation and the property market. Therefore, we remain of the view that EUR/CHF will hold around 1.06 in coming months.”