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The Swiss National Bank (SNB) had its quarterly monetary policy meeting on Thursday and there was no surprise in the monetary policy stance being left unchanged. Economists at MUFG Bank expect the EUR/CHF pair to move higher based on the global reflation assumption.

Key quotes  

“There is hardly any reason for any considerable shift in policy stance and the only notable change was the SNB committed to intervening to limit CHF strength “as necessary’ in contrast to the commitment last year post-COVID to intervene ‘more strongly’ in order to achieve its price stability goal.  

“While Switzerland now meets the US Treasury criteria for being a “currency manipulator” we doubt it will shape SNB behaviour much and we doubt it will change US behaviour much either. The Swiss correctly point out that the QE policy undertaken by large countries like the US is not available to the SNB and therefore have to utilise foreign asset purchases to expand its balance sheet.”  

“External factors will continue to dictate CHF movement and direction and we maintain that and based on our global reflation assumption, we continue to see scope for EUR/CHF moving further higher this year.”

“USD/CHF is currently higher than we expected given EUR/USD is far lower. Assuming EUR/USD corrects higher again later this year, then EUR/CHF will be the avenue of CHF depreciation not USD/CHF.”