Swiss Franc Pulls Back

The Swiss franc firmed to 0.78 per USD, reaching the highest since May 12, as optimism about a potential deal between the US and Iran reduced demand for the greenback as a safe-haven. Signs emerged that the US and Iran were moving closer to reach a long-awaited peace deal, though more steps are needed until a final agreement, with key sticking points including the Strait of Hormuz and Iran’s nuclear programme. Meanwhile, Swiss National Bank (SNB) Vice Chairman Martin Schlegel said recently that although Swiss inflation currently remains within the SNB’s price stability range, the central bank maintains a strong readiness to intervene in foreign exchange markets if necessary. Swiss inflation rose to 0.6% in April, its highest level in 16 months, driven by rising energy costs linked to the war in the Middle East. The Swiss franc has been benefiting strongly from safe-haven inflows amid prolonged geopolitical tensions and global trade uncertainties.

The Swiss franc traded around 0.78 per USD, near record highs, as investors evaluated the Swiss National Bank’s policy outlook following the latest inflation data. Ongoing safe-haven flows also lent support. Swiss inflation rose to 0.6% in April, its highest level in 16 months, driven by rising energy costs linked to the war in the Middle East. The increase marked a second consecutive acceleration and pushed the headline inflation rate above the 0.5% average projected by the SNB for this year and 2027 at its last policy meeting in March. Although the central bank expects the spike in costs to be temporary, with minimal change to medium-term price pressures, this offers breathing space for policymakers, who were previously confronting subdued inflation before the Iran war, driven by the strength of the franc. SNB Chairman Martin Schlegel said last month that higher energy prices should lift inflation further in coming quarters, while growth is likely to remain subdued in the near term.

The Swiss franc traded around 0.79 per USD, hovering near two-week lows, as persistent US-Iran conflict uncertainty has prompted investors to favor the greenback as a refuge asset. The initial boost from a ceasefire extension proved short-lived amid stalled negotiations and ongoing tensions in the Strait of Hormuz, keeping risks elevated. Meanwhile, Swiss National Bank Chairman Martin Schlegel said at the SNB's General Meeting that the central bank is open to policy adjustments and FX market intervention, reaffirming its inclination to buy foreign currencies to weaken the franc. He added that Switzerland faces a more uncertain outlook, with subdued short-term growth and rising inflation ahead due to higher energy costs. Swiss inflation has recently been sitting at the lower end of the SNB’s 0–2% target range, which is viewed as price stability.