Swiss Franc Faces Prolonged Weakness Before Potential Rebound

Commerzbank FX analyst Michael Pfister expects the Swiss Franc (CHF) to remain under pressure through 2026 due to subdued inflation and limited intervention capacity of the Swiss National Bank (SNB).

Pfister highlights that despite recent reports suggesting the SNB might keep interest rates unchanged until the end of 2027, markets are still pricing in a rate hike by mid-2027. However, he believes this is unlikely given the current inflationary trend.

He notes that Swiss inflation is likely to remain subdued in the coming months, leading the market to gradually adjust its expectations. This, combined with widening rate differentials versus the European Central Bank (ECB), will exert downward pressure on the Franc.

In the medium term, Pfister expects the SNB's limited options for weakening the franc to become apparent once again. He believes the SNB is unlikely to prevent the Franc from appreciating again after remaining expectations of rate hikes have been priced out.