Fundamental Forecast for Swiss Franc: Neutral

- Swiss Consumer Prices Expand at Fastest Since in 16 Months
- USDCHF – Swiss Franc Expected to Weaken

The Swiss Franc weakened against the greenback, with the exchange rate pushing to a fresh monthly high of 1.0784, while the low-yielding currency continued to lose ground against the Euro on speculation the Swiss National Bank intervened in the foreign exchange market to counter the appreciation in the exchange rate.

On Friday, the EUR/CHF crossed above the 20-Day SMA (1.4344) for the first time in nearly two-months and advanced to 1.4395 during the early U.S. trade, and the pair may continue to retrace the March decline over the following week as price action holds above the 10-Day SMA at 1.4317. However, as Greece struggles to bring its public finances back in-line with the EU stability pact, market fears could stoke an increase in safe-haven flows, which would continue to put downward pressures on the euro-franc. At the same time, the USD/CHF pared the rally from earlier in the week, with the exchange rate falling back below the 50-Day SMA (1.0681), and a break below the 20-Day SMA (1.0627) could lead the pair to test the 200-Day SMA at 1.0474 for near-term support.

Nevertheless, SNB board member Jean-Pierre Danthine held a cautious outlook during at an event in Lausanne, Switzerland and said “avoiding inflation” will be a challenging task “in the medium term” as central banks around the world maintain a loose policy stance, and went onto say normalizing monetary policy will become an increasing task as the global recovery gathers pace. Meanwhile, producer & import prices are forecasted to increase 0.4% in March, while the annualized reading is expectedly slip 0.1% from the previous year after contracting 1.0% in February. As the outlook for growth and inflation improves, the Swiss central bank is likely to hold an improved outlook for the real economy as policy makers aim to curb the risks for deflation, but the ongoing strengthen in the low-yielding currency may keep the SNB on alert as it tempers the prospects for a sustainable recovery.

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