Base effect meets upside surprises in neighboring countries – Commerzbank

On the last day of last year, the Swiss National Bank (SNB) announced the extent of its foreign exchange interventions in the third quarter – and given repeated hints from officials that further intervention was possible at any time, this was perhaps one of the most significant interventions. Important data points in recent months. However, unsurprisingly, the SNB bought relatively little foreign currency in the third quarter, just under 730 million Swiss francs, artificially only slightly weakening the franc. Given that the franc strengthened significantly in the third quarter on the back of growing risk aversion, this is a signal from the SNB that it will intervene more forcefully only in the event of a severe emergency, notes Michael Pfister, foreign exchange market analyst at Commerzbank.

Any movements in the Swiss franc will be short-lived

“Currently, the key interest rate remains the preferred tool for responding to inflationary developments. With its surprise 50 basis point rate cut in December, the SNB signaled that the risk of a return to negative interest rates has decreased and that the SNB has actually advanced On the curve again in terms of inflation stabilizing within the target range in the longer term However, it may take some time for this effect to be reflected in price increases and so two more effects are likely to be evident in today’s December numbers.

“On the one hand, the relatively large increase in prices compared to last December will fall out of the year-on-year rate calculation, which will artificially lower the year-on-year rate. On the other hand, there are also other factors that will lead to Price pressures are somewhat stronger again. For example, oil prices rose again in December, indicating higher transportation costs in Switzerland. On the other hand, Spanish and German inflation numbers have surprised both to the upside in recent days, which , due to the high correlation “Relative to the Swiss numbers, they also indicate stronger price pressures in Switzerland. In short, today’s numbers promise to be very exciting.”

“However, the usual fluctuations in monthly inflation numbers are likely to be less important for the SNB than the longer-term trend. Furthermore, concerns about a second Trump administration and its potential impact on global inflation are likely to grow in Switzerland as well. So it is “It is possible that the SNB will look at a possible surprise today and that any moves in the Swiss franc will be short-lived.”