Arnaud Masset
Swissquote Bank Ltd
After hitting 1.1368 at the beginning of the summer, EUR/CHF has been climbing its way back to 1.1696. However, the currency pair is still well below the multi-year high that was reached at the beginning of the second quarter. Indeed, the currency pair passed the 1.20 threshold before grinding towards 1.1368 amid the nomination of the new Italian government, mounting trade war fears and an unexpectedly dovish ECB.
The recovery in EUR/CHF is therefore exclusively due to the improvement in risk sentiment rather than the strengthening of the single currency. SNB kept a stiff upper lip and didn’t change a thing in its strategy. Total sight deposits held within the SNB have been quite stable since mid-2017, which suggest that the SNB didn’t intervened in the FX market; after all, EUR/CHF is well outside the danger zone.
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The Swiss National Bank will maintain its wait-and-see approach and will let the ECB be the first mover. For now the market, is expecting Mario Draghi to start raising rates in mid-2019. With risk sentiment improving across the board, the recovery in EUR/CHF should continue. However, trade tensions between the US and its main trading partners remain of major concern for investors. A quick deterioration in market environment could ignite a CHF appreciation. We maintain our objective of 1.20 for the end of the summer.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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