The Franc should remain under downward pressure against the Euro – Commerzbank

The Swiss National Bank (SNB) delivered a 25 basis points rate cut to 1.50%, which triggered a sharp sell-off in CHF. Economists at Commerzbank analyze Franc’s outlook.

The SNB kicks off

The SNB surprised the majority of market participants by being the first of the G10 central banks to cut its key interest rate by 25 bps to 1.50%, which immediately sent the Franc plummeting.

In principle, the SNB has less leeway than other central banks to lower the key interest rate, as it has not raised it that sharply. In this respect, if it turns out that the ECB makes several interest rate cuts, but the SNB has possibly already done enough with this first step to guarantee price stability, the franc could even appreciate.

But let’s wait and see; if inflation continues to fall, the SNB may well continue and cut rates further. For the time being, the SNB’s action on Thursday suggests that the Franc should remain under downward pressure against the Euro.