The CHF narrowly avoided the title of being the worst performing G10 major versus the USD in Q1 to the JPY. While the CHF’s slide versus the EUR across the quarter was a modest 2.2%, the fact that EUR/CHF appears increasingly comfortable above the 1.10 threshold underlines relative central bank inertia, as reported by CIBC Capital Markets.

SNB moderated their intervention language

“As the OECD view the CHF as being more than 30% overvalued versus its main trading partner, the EU, it’s unsurprising that the bank remains mindful of CHF valuations.”

“The easing in the value of the currency has prompted the central bank to moderate their language on the topic of the currency. The SNB now commits to act merely ‘as necessary’. However, SNB President Jordan was quick to reassure the market that the bank had not materially changed its stance, affirming there was no change in the bank’s commitment to the currency. Therefore, we would expect any CHF gains to be contained by the central bank.” 

“The perpetuation of the global recovery narrative, largely predicated upon gains in the US and China, provides scope for those leveraged upon the reflation trends.”

“For the CHF the backdrop of continued policy inertia, rates have been at -0.75% since 2015, points towards relative underperformance against those currencies which are set to witness more direct gains from rising global growth.”