EUR/CHF: SNB does not find love in prices – Rabobank
|The Swiss National Bank (SNB) has the mandate to maintain CPI inflation near 2% on a yearly basis but is currently running at just 0.2%. CHF’s strength is not welcomed by SNB, economists at Rabobank reports.
Key quotes
“The strong performance of the CHF can be associated with Switzerland’s robust fundamentals which ensure that the currency is considered by many investors to be store of value. While there have been a wide number of exogenous factors which have sparked flows into safe-haven currencies such as the CHF or the JPY over the years, the CHF is particularly sensitive to bad news stemming from the Eurozone.”
“Even if coronavirus fears lessen, the recent worsening in Eurozone economic data threatens to keep the CHF stronger for longer. The SNB is mandated to ensure price stability which equates with a rise in CPI inflation of less than 2% y/y. Swiss headline CPI inflation is currently running at just 0.2% y/y and has not been above the 2.0% level since a temporary spike in 2008.”
“In view of the SNB’s long-standing difficulties in supporting inflation, sporadic inflows associated with safe-haven demand for the CHF are very unwelcome. Even so, it is our expectation that Eurozone growth will be sluggish this year implying that EUR/CHF is likely to continue to trade heavily. In addition, any surge in coronavirus fears are also likely to benefit the CHF given its safe-haven status.”
“Having breached the 2017 low around 1.0624, technical indicators suggest that EUR/CHF could be headed towards 1.05. That said, momentum currently appears to be stretched which suggests there is scope for a period of consolidation around current levels. For now, we maintain our 3-month EUR/CHF forecast of 1.06.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.