Swiss Franc Weakens Against Euro Amid ECB-SNB Policy Divergence

The Swiss Franc continues to weaken against the Euro as widening yield differentials favor the Euro. The EUR/CHF exchange rate reached new highs, trading at 0.9332.

MUFG's Lee Hardman reports that markets now price in further European Central Bank (ECB) hikes, with a higher probability of two more hikes this year. Bloomberg has reported that ECB officials are prepared to raise rates again in September unless the inflation outlook improves markedly.

In contrast, the Swiss National Bank (SNB) may keep interest rates at 0.00% until 2027, according to people familiar with the central bank's thinking. The SNB is comfortable with the current inflation outlook and stands ready to sell Swiss Francs only against excessive appreciation.