EUR/CHF now trades closer to 1.09 than 1.10, as US real rates have moved lower. However, there has been a clear and important shift in US monetary policy with the Fed rhetoric turning increasingly hawkish. The shift has triggered a rebound in the USD, which is set to drive the EUR/CHF pair higher, according to economists at Danske Bank.
Fed is turning increasingly hawkish
“We still see a case for higher US real rates, especially now the Fed is turning more hawkish. We expect this will send EUR/CHF higher although we think most of the increases are now behind us. We still expect EUR/CHF to trade around 1.13 in 12M.”
“The key for the pair is if the global macro becomes so good in Europe that markets start talking about ECB rate hikes. Today, such a scenario is not in play. A setback in risk sentiment is another joker.”
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