ECB hike expectations and peace deal hopes pressure Swiss Franc

Gregor Horvat Wavetraders

ECB member Schnabel recently stated that the ECB should still consider another rate hike in June, even if a peace deal is reached geopolitically. That is quite an important signal because it suggests the ECB remains focused on inflation risks and is not yet ready to turn fully dovish.

At the same time, the Swiss franc could face pressure if geopolitical tensions continue to ease. CHF has benefited heavily from safe-haven inflows during periods of uncertainty, but if markets begin pricing in more stability and lower geopolitical risk, then demand for the franc could start fading. This becomes even more important when combined with the relatively neutral to dovish stance from the SNB compared to the more hawkish ECB rhetoric.

From a technical and Elliott Wave perspective, EURCHF is now approaching a very interesting support area after an extended decline. Price action appears stretched, and if the market starts stabilizing around current levels, we could eventually see a larger corrective rebound develop.

So fundamentally and technically, there are signs that downside momentum on EURCHF may be slowing. A combination of hawkish ECB expectations, softer safe-haven demand for CHF, and diverging central bank outlooks could become an important catalyst for a reversal higher in the pair over the coming weeks.

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Author

Gregor Horvat

Wavetraders

Experience Grega is based in Slovenia and has been in the Forex market since 2003.

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