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Negative inflation prints are well possible this yearA few months of negative inflation wouldn’t be a problemThe SNB left everything unchanged at the last policy decision and sounded a bit more positive on the future outlook given the lower US tariff rate. SNB’s members continue to repeat that the bar for going back to negative rates remains very high and these latest comments from Chairman Schlegel reaffirm that stance.He said that negative inflation prints are well possible this year but added that they wouldn’t be a problem. Market participants were betting on negative rates at some point last year as inflation kept on falling towards deflation territory. The persistent pushback from the central bank eventually reversed those expectations.The main problem has been the strength in the Swiss Franc which reached a new record high versus the Euro last year due to geopolitical concerns over Trump’s tariffs. The CHF is the purest “safe haven” bet in the FX market for several reasons that range from political stability and neutrality to fiscal and monetary discipline.Looking ahead, the market is not pricing any rate cut for this year and we certainly won’t see a rate hike. This leaves the Swiss Franc trading mainly on risk sentiment. The focus is now on Greenland and the latest tariff threats from Trump. If we were to get a de-escalation, the CHF would likely weaken across the board, but if Trump decides to escalate further, then we could see new highs in the Franc which would add downward pressure on inflation.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
Negative inflation prints could shake up the market, and here’s why: If inflation dips, it might signal a shift in monetary policy, impacting currencies like the Swiss Franc. The SNB’s recent decision to maintain its stance suggests they’re cautiously optimistic, but traders should be wary of potential volatility. A few months of negative inflation could lead to speculation about rate cuts, which typically weakens a currency. Watch for any shifts in economic indicators that could influence the SNB’s next move. If inflation trends downward, it might create a ripple effect across other currencies, especially if the US continues to lower tariffs. Keep an eye on key levels for the Swiss Franc against major pairs; if it breaks below recent support levels, it could trigger further selling pressure. The real story is how traders react to these inflation prints—are they pricing in a dovish SNB? Look for immediate reactions in the forex market, especially on the daily charts, as traders digest this information.
📮 Takeaway
Monitor Swiss Franc levels closely; a break below support could signal increased selling pressure amid potential negative inflation trends.
