EUR/CHF: SNB’s efforts to steer franc to weaker levels to be effective by end-2021 – Rabobank

Economists at Rabobank expect Switzerland’s FX intervention policy to have more effect at the end of the year and, therefore, forecast the EUR/CHF pair at 1.10 by the end of 2021.

Key quotes

“Insofar as the CHF is an established safe haven currency, it is reasonable to expect that the SNB’s efforts to undermine the value of the currency may have more effect in the latter half of this year. This assumes that growth levels in the eurozone are then strengthening and that the risks associated with the pandemic have subsided.”

“We have frequently argued that for EUR/CHF to rise enough for the SNB to be able to abandon both negative rates and its FX intervention policy that EMU would have to be stronger, stable and more coherent. Until the EUR can claim a greater share of safe haven flow, EUR/CHF will be prone to moving lower on any whiff of crisis or recession. The EUR may be several decades away from gaining safe haven status. And many hurdles remain.” 

“We maintain our forecast that EUR/CHF could rise to 1.10 towards the end of the year.”