MS comments in brief via eFX.

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  • "We keep our bullish CHF bias. The SNB has made clear its preference is for a stronger - not weaker - currency in order to weigh against imported inflation. The central bank's reaction function to CHF is also no longer one-sided, with SNB selling foreign currency (CHF buying) now also a possibility if CHF weakens. We think the SNB would prefer to use rate hikes over the balance sheet for now, but eventual buying of CHF cannot be ruled out if the currency does not strengthen," MS notes.
  • "The recent fall in PMIs and reduced gas supplies suggest the European growth outlook could also worsen from here, keeping downward pressure on EUR/CHF. CHF/JPY should also keep grinding higher, fuelled by monetary policy divergence," MS adds.


The SNB surprised (nearly) everyone in the market with their rate hike (arrow in chart below)

usdchf rate hike snb 29 June 2022