Swiss CPI likely to see a modest decline

Recent elevated global growth concerns, coupled by an uptick in Swiss growth last week, has caused the CHF to appreciate in the past few weeks and has led SNB Governor Jordan to reiterate the SNB's ability to intervene further in FX markets should the need arise. 

"Next week's focus will center on Swiss CPI inflation where market expectations are for a more modest rate of decline in consumer prices. This implies a -1.4% y/y CPI rate. Elsewhere, the KOF leading indicator is expected to increase further, to 100.3 from 99.8, implying further upside risks to Swiss GDP in the coming quarters", says Barclays. 

Yet despite the fading pass-through of the strong CHF on Swiss growth, risks to inflation remain skewed to the downside, particularly given renewed declines in energy prices, and sustained currency strength is unlikely to be tolerated by SNB officials. 

"Despite recently being stopped out from long USD/CHF spot position, the view remains that the SNB can do much more should the need arise and continue to believe in CHF depreciation from levels of extreme overvaluation", added Barclays.