EUR/CHF: To recover modestly over the next months – Danske Bank

Analyst at Danske Bank, keep their forecast for the EUR/CHF pair unchanged at 1.08 in a month, 1.08 in three months, 1.09 in six months and at 1.10 in twelve months. They see the risks for the cross as increasingly asymmetric. 

Key Quotes: 

“EUR/CHF moved markedly higher on EU optimism and abating euro-zone tail risks late spring – and we still see a constructive global risk/reflation/recovery environment in H2 supporting the pair. However, since mid-July the pair has been hovering in a relatively tight range from just below 1.0750 to 1.0850. SNB is not going anywhere for now, hoping Fed will do the job on global inflation: intervention remains a key policy tool and policy rates are set to stay unchanged at the long-standing -0.75% for an extended period of time.”

“We stress that risks in EUR/CHF are increasingly asymmetric though as SNB holds the downside in check and that – absent a double-dip global recession - the key risk is a jump towards or above 1.10 if global reflation grabs hold.”

“Fed policy is the key joker here but a dovish September announcement is no longer a done deal, which suggests the cross will stay range-bound with an upside bias into the autumn. We keep our EUR/CHF forecasts unchanged, thus seeing the cross at 1.08 in 1M, 1.08 in 3M, 1.09 in 6M and 1.10 in 12M.”