Swiss inflation for August surprised to the downside on 3 September at 1.1% y-o-y. Importantly, this is the second print for Q3 that is below the SNB’s 1.5% forecast for the quarter. This suggests that the SNB will need to lower its forecasts at its meeting on 26 September. Swiss FX reserves for August also point to potential FX intervention to curb CHF strength. Adding to the case for a dovish approach is the Swiss government’s new inflation forecast published Thursday last week which sees consumer-price growth slow to 0.7% next year, significantly below the SNB’s last estimate. The 26 September SNB meeting will be the last chaired by outgoing president Thomas Jordan. Hence, we believe he will like to leave on a note of strong monetary action by cutting 50 bps rather than the customary 25 bps. Hence we recommend being long USDCHF.
