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According to a new analysis from Commerzbank, the Euro to Franc exchange rate is unlikely to return above the 1.0 level.

You-Na Park-Heger, FX Analyst at Commerzbank, says the Swiss National Bank (SNB) will continue to favour a stronger Franc even as the global inflationary pulse continues to fade.

"It is likely to continue to see a depreciation of the franc as a risk to inflation developments," she says.

Any defence of the Franc will likely involve the active FX market intervention the SNB is renowned for, but Commerzbank says it will also achieve this end by maintaining a hawkish stance relative to the European Central Bank (ECB).

The SNB opted to keep interest rates on hold at 1.75% in September, a decision that resulted in some short-term CHF weakness.

"The SNB took a pause in its interest rate hike cycle in September. The easing of price pressures justifies this step. However, it remains vigilant and is still concerned about possible second-round effects," says Park-Heger.

Commerzbank's economists see the SNB raising its inflation forecast (1.9% for 2025) again, suggesting it has left the door open for further interest rate hikes.

"The franc should trend firmly against the EUR for the time being. On the one hand, the ECB has all but ruled out a further interest rate hike, despite high core inflation. On the other hand, the SNB has left the door open for another rate hike, despite core inflation being in the target range. Additionally, the economic slowdown in the eurozone is likely to weigh on the EUR," says Park-Heger.

Commerzbank is forecasting the Euro to appreciate against the Franc in 2024, but it no longer expects the Euro-Franc exchange rate to rise above parity.

"Inflation concerns are likely to persist next year and the SNB is likely to continue to favour a strong franc to keep price pressures low in Switzerland," says Park-Heger.

EURCHF is forecast at 0.96 by year-end 2023, 0.99 by mid-2024 and 0.98 by end-2024.

The USDCHF is forecast at 0.91, 0.88 and 0.90 for these respective time points.