(Kitco News) – Analysts at the German inventment bank Deutsche Bank have released a controversial research note suggesting that the Swiss Franc (CHF) is a better inflation hedge than gold. The analyst note said the “Swiss franc is now a better hedge against spiraling inflation than gold”. The Swiss National Bank (SNB) hiked interest rates yesterday by 50 bps for the first time in 15 years. It has been touted by some analysts that the SNB only made the decision to keep up with the likes of the BoE and Fed.
“This rate hike will come as a considerable surprise to the domestic market in particular, where expectations for any policy change today had been minimal going into this meeting” said Robert Winkler, currency analyst at Deutsche Bank.
He added “Combined with the large rate hike, the signal to the market is even clearer than it has been in recent months: the SNB now desires a stronger Swiss franc. The rationale is clear: to prevent the transmission of excessive inflation from the Eurozone.”
The SNB like all the other central banks made this move to stop inflation “spreading more broadly”. The inflation hit 2.9% in May, the highest level for around 14 years. The bank said “The tighter monetary policy is aimed at preventing inflation from spreading more broadly to goods and services in Switzerland. Lastly the bank noted, “It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future.”
Looking at the daily chart below, the price of USD/CHF did fall following the rate decision but we need to see if the trend continues as inflation seems to bite. This only seems like a brief retracement from a decent uptrend and a break of the support level on the chart would inspire more confidence from the CHF bulls.
