Swiss Francs: At the ECB’s Mercy – Commerzbank
Dr Jörg Krämer, Chief Economist at Commerzbank, suggests that the Swiss economy has so far coped well with the discontinuation of the EUR-CHF exchange rate floor.
“Still high margin pressure from the strong franc remains a significant economic risk, though.
The strong franc has put a dampener on inflation. At present, however, we note signs of a stabilisation.
Against this backdrop the SNB is hoping for a depreciation of the franc. But it lacks the tools to actively weaken the currency. It has already lowered its deposit rate to -0.75%. Further rate cuts would only fuel holdings of bank notes.
The SNB is still willing to intervene on the FX market. In this way it can prevent a stronger appreciation of the franc but will not be able to create a lasting depreciation.
Against the backdrop of a more proactive ECB, we see downside potential in EUR-CHF.”