Weaker Swiss Franc Has Moderate Impact on Inflation, Analysts Say

Commerzbank's Michael Pfister has analyzed the impact of the Swiss National Bank's (SNB) shift towards tolerating a weaker Swiss Franc on inflation and EUR/CHF. Using a structural exchange rate pass-through model, he found that Euro-denominated trade dominates short-term effects, with the euro channel being around 3.8 times stronger than the US dollar channel.

The study estimates that the inflationary effect of the franc's depreciation at 12 months is approximately 0.18 percentage points, which is relevant given the vulnerability of Swiss industry to energy price shocks. In contrast, a similar analysis in 2022 found that the strength of the Swiss Franc reduced inflation by around 0.22 percentage points after 12 months.

According to Pfister, the interest rate differential between the euro area and Switzerland is likely to persist for some time, benefiting EUR/CHF in the medium term. Investors who share this view can use options markets as an attractive entry point to gain exposure to the expected exchange-rate move while avoiding financing costs associated with spot positions.