Danske Bank analysts are keeping their forecast for the EUR / CHF pair unchanged at 1.08 in one month, 1.08 in three months, 1.09 in six months and 1.10 in twelve months. They see the risks of crosses as more and more asymmetrical.
EUR / CHF rose sharply due to EU optimism and Eurozone tail risk reduction in late spring – and we still see a constructive risk / reflation / recovery environment in the second semester supporting the pair. However, since mid-July the pair has been hovering in a relatively narrow range of just below 1.0750 to 1.0850. The SNB is not going anywhere right now, hoping the Fed will do the job on global inflation: intervention remains a key policy tool and policy rates are expected to remain unchanged at -0.75% for a long time for an extended period .
“We stress that the risks in EUR / CHF are increasingly asymmetric with the SNB controlling the downside and that in the absence of a global double-dip recession the main risk is a jump towards or above 1.10 if global reflation holds.
Fed policy is the key wildcard here, but an accommodating September announcement is no longer a deal, suggesting the cross will remain tied to the range with an upward bias until the fall. We are keeping our EUR / CHF guidance unchanged, seeing the cross at 1.08 in 1M, 1.08 in 3M, 1.09 in 6M and 1.10 in 12M. “