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Investing.com - Goldman Sachs expects the Swiss franc to strengthen against the euro after recent weakness, citing rising inflation pressures that may limit the Swiss National Bank’s currency interventions.
The franc underperformed in March following an explicit shift in the SNB’s intervention bias at the start of the current energy shock. Goldman Sachs sees a building case for a reversal lower in EUR/CHF from current levels, expecting a pattern similar to 2022 when initial SNB-driven franc weakness gave way to clearer downside in the currency pair.
Switzerland’s near-0% starting point on headline inflation has been central to the SNB’s increased willingness to counter franc appreciation. Goldman Sachs analysis finds that inflation, rather than the level of EUR/CHF, has been the clearer driver of the SNB’s historical intervention behavior.
Friday’s March inflation data showed less of a pick-up than expected. A sharp rise in the prices component of the March Swiss manufacturing PMI suggests inflationary pressures are in the pipeline, with a lower hurdle to overshoot the SNB’s March projections, Goldman Sachs said.
The SNB’s current intervention stance may continue to limit the franc’s haven behavior in the near term. Goldman Sachs increasingly favors outright downside EUR/CHF exposure over the medium term as growing upside risks to inflation from the energy shock should lead to more acceptance of steady franc outperformance.
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