The initial optimism that followed the positive vaccine news at the start of last week brought a collective sigh of relief from the global population. The improvement in risk appetite led to a sharp upward adjustment in the value of the EUR/CHF. Additionally, the Swiss Nationa Bank (SNB) maintains a policy of FX intervention. All in all, Jane Foley Senior FX Strategist at Rabobank, expects the EUR/CHF pair to post a slight appreciation in the coming months.
Key quotes
“Assuming risk appetite remains in a better footing the implication is that the SNB may be able to take its foot off the pedal somewhat in its efforts to offset gains in the value of the CHF. That said, the war on currency strength is far from won.
“The bad news for the SNB is that in the current environment the number of other G10 central banks fighting disinflation or deflation have increased. This could mean that the SNB’s effort to weaken its currency could be less effective. We see EUR/CHF at the 1.08 area on a 3-month view rising only moderately to 1.09 next summer.”
“While other central banks may continue to steer away from FX intervention, against the backdrop of excess capacity and downward pressure on inflation in the wake of the covid crisis many more have unleashed easier monetary policies which includes QE. The ECB is widely expected to increase its asset purchases in its December policy meeting. The downward pressure on interest rate curves across the eurozone could detract from the attraction of the EUR and limit upside potential for EUR/CHF.”
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