EUR/CHF is on the rise and the Swiss National Bank must be smiling. We are nearing the 6-year anniversary of the 1.20 floor under Euro/Swiss, a floor which was later abandoned in the “SNBomb“. And now, we may be nearing that level again.
Here is their view, courtesy of eFXnews:
Danske FX Strategy Research sees further EUR/CHF upside in the medium-term on the back of 2 key reasons:
“First, while a range of central banks including notably the ECB has had a hard time concealing their eagerness to start ‘normalising’ monetary policy in a move that we have dubbed the ‘Sintra accord’, 14 July, the Swiss National Bank (SNB) has used every opportunity to stress that it is in no hurry to exit from negative rates.
Second, the change in political sentiment towards the eurozone witnessed over the past few months following the French presidential election and the latest eurozone growth outperformance have joined forces to create a very positive euro momentum. However, crucially for CHF this turning tide also appears to have halted some safe-haven flows. Notably, spreads continuing to narrow in the euro periphery are indeed a sign of the increased optimism regarding the future of the eurozone,” Danske argues.
“Our G10 medium-term valuation (MEVA) model continues to point towards a EUR/CHF in the mid-1.20s as fundamentally justified on a longer-term horizon and we have upped our 12M forecast for the cross to 1.20,” Danske projects.
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