The Swiss franc has had a rocky ride over the past month. In late July, it depreciated sharply to SFr1.15 to the euro, its lowest level since January 2015 when the Swiss National Bank abandoned its exchange rate ceiling. The decline followed SNB Chairman Thomas Jordan’s reiteration that the franc remained “significantly overvalued” and that the Bank would consequently not alter its ultra-accommodative stance despite diminished euro-zone political risks and the ECB’s hints of policy normalisation. Hopes that the franc would continue to slide were short-lived. In early August, rising global geopolitical tensions reversed some of the currency’s slide as investors once more sought out safe havens. Nonetheless, the depreciation of the currency should be positive for Swiss exporters, which over the past couple of years have struggled with a strong exchange rate. It will also help to put some much-needed upward pressure on inflation, which remains close to zero. While we see the franc regaining a bit more ground against the euro over the coming months, we then see it depreciating over 2018 and 2019 to SFr1.15 and SFr1.20, respectively.
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