Swiss Franc: Dovish SNB keeps CHF under pressure against US Dollar – ING

ING’s Francesco Pesole reveals that the Swiss National Bank maintained interest rates but surprised markets with a dovish turn. He believes that market expectations are overly hawkish and sees limited reasons for the SNB to tighten policy in the near future. The bank kept rates steady, as anticipated, but signaled a more dovish stance on inflation, dismissing concerns about second-round effects.

The franc has been under pressure due to recent weakness, though the bank’s promise to act if needed remains unchanged. While this update may seem concerning, it is merely a reflection of the franc’s weakened position and not a sign of reluctance to intervene should the currency appreciate further. Pesole argues that market pricing needs to be adjusted, as a rate hike is now expected by March.

However, he still sees few reasons for the SNB to tighten policy at this stage. According to Pesole, there are downside risks for the Swiss Franc, with EUR/CHF potentially testing the 0.9480 mark seen earlier in September. He also believes that USD/CHF could rally toward 0.85 if the Federal Reserve raises interest rates in October.