FX.co ★ Swiss Franc Holds Firm

The Swiss franc hovered around 0.80 against the USD, maintaining its proximity to its highest level since 2021, as investors evaluated the Swiss National Bank's (SNB) policy direction ahead of the upcoming meeting. Notably, Switzerland's Consumer Price Index (CPI) unexpectedly held steady in November compared to the previous year, while the core inflation metric fell to a four-year low. This marks the second consecutive month of unexpected easing for SNB officials, following October's deceleration. This scenario presents a dilemma for the central bank, which originally projected an average inflation rate of 0.4% for the fourth quarter. With interest rates at 0%, SNB policymakers are cautious about further reductions due to potential financial stability risks, although they have expressed readiness to intervene if necessary. SNB representatives have suggested that a return to negative rates would require significant developments, yet they remain open to policy adjustments, especially as inflation is anticipated to rise slightly in the upcoming quarters. Additionally, demand for safe-haven assets has been bolstering the currency.