The franc's exchange rate plummeted. PLN strongest since June 2022

The fourth month of strengthening of the zloty against the Swiss franc is underway, which brings the CHF/PLN exchange rate to 4,36, which in turn means that the franc to the zloty is the cheapest since June 2022. The quotations of this currency pair are just a little short of breaking the low from two years ago. years and fall to the lowest levels since February 2022. Let us recall that the peak of the CHF/PLN exchange rate was recorded in September 2022, when the franc cost PLN 5,13 and since then the Polish currency has appreciated by approximately 17%.

The franc is weakening as inflation and rates fall in Switzerland

The Swiss Bank recently surprised markets with its decision to cut interest rates by 25 basis points to 1,5%. It was the first move of its kind since the end of the pandemic and made Switzerland the first major central bank to announce a rate cut in recent months. The bank's president, Thomas Jordan, attributed this decision to the effective fight against inflation, which has brought positive results over the last 2,5 years. The Swiss Bank also lowered its forecasts for the growth of consumer prices, not predicting their increase above 1,5% until 2026.

The second main reason for the rate cut was the intention to prevent further gains in the Swiss franc and to reduce the need for intervention in the currency market. Acting now Bank of Switzerland avoided waiting for a move from global peers like the Fed and the European Central Bank. The effects of this action are now clearly visible and satisfactory for the SNB. Frank became weaker.

Inflation lower than expected, as well as the CHF exchange rate

Inflation in Switzerland fell in March to its lowest level in two and a half years. Consumer prices rose 1% from March 2023, the lowest level since September 2021, and fell from 1,2% in February. This was the tenth month in a row in which inflation was within the SNB's target range of 0-2%. Switzerland was protected from inflation by a strong franc and import prices fell by 1,3% in March. The costs of food, restaurants and hotels have fallen, according to published data.

What next with the Swiss franc exchange rate?

The SNB seems determined to reduce the value of the Swiss franc, which may support the zloty prices towards the lowest levels since February 2022. Thus, the level of PLN 4,25 may be tested even further with such a strong weakening momentum of the Swiss currency.

However, it should be remembered that the exchange rate is the result of the relationship of two currencies to each other. In Poland, in turn, we face months of falling real rates and another increase in inflation, but without any increases in NBP rates. As a result, the factors favorable to the Polish zloty may decrease, which may mean that after a temporary further appreciation of the Polish zloty, there may come a time, already this holiday season, when the zloty will begin to depreciate towards 4,45-4,50 against the CHF.