Swiss National Bank

The SNB has stated on many occasions their reluctance to allow the CHF to be overvalued through safe haven currency flows when risk sentiment enters the market. The SNB has been known for interfering in the FX markets and purposefully lowering the exchange rate to make sure exports remain at a reasonable price. This helps the economy grow as an increase in national income results in a rise in domestic spending which helps drives inflation towards the banks 2% target.

 

The SNB has struggled to get inflation back to their 2% target since the financial crash in 2008. The bank has embarked on a Quantitative easing bond purchasing program to try and stimulate inflation. The SNB maintain's that their negative interest rates and FX intervention is necessary to support their inflation objectives. The bank wants to keep the CHF weak against the EUR, which is Switzerland biggest trading partner. A weak CHF allows exports to be cheaper to the eurozone which can drive up national income and support inflation being imported into the country. 

 

The SNB will wait for the ECB to firstly end its QE program and lift interest rates before the SNB begins to do the same. This will allow the EUR to be considerably stronger then the CHF over the next few years as help export sales drive up swiss inflation.  

Key economic indicators that will directly impact the value of the Swiss Franc

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  1. Unemployment Rate

  2. Wages

  3. Retail Sales (Spending)

  4. Inflation

 

Currency Sentiment - Neutral