USD/CHF’s decline of late was largely due to the USD leg as markets re-priced for larger than expected magnitude of Fed cut, and, if the broad USD trend is for further depreciation bias, then USD/CHF may still be broadly skewed to the downside, OCBC FX analysts Frances Cheung and Christopher Wong note.

SNB to support exporters by curbing the strength of CHF

“The revival in market confidence to re-price for 50bp Fed cut can be attributed to initial jobless claims data (which rose again) and the WSJ article on Fed’s rate cut dilemma. We are still of the view that recent CHF strength should slow as SNB pursues a neutral monetary policy and is likely to lower policy rate (by 25bp) to 1% at its upcoming MPC on 26 Sep, for the 3rd consecutive time this year.’

“Swiss inflation is also well under control at 1.1% in line with SNB’s expectations and a benign inflation profile allows for SNB to ease policy. In addition, industry lobby groups including watchmakers, technology manufacturers’ association have urged SNB and the government to support exporters by curbing the strength of CHF.”