EUR/CHF to trade at 1.09 by year-end as SNB keeps a lid on franc strength – CIBC

Economists at CIBC Capital Markets continue to expect the Swiss National Bank (SNB) to maintain a vigilant stance regarding the franc, as the central bank believes the currency is highly valued. With a floor settled around the 1.06 mark, the EUR/CHF is forecast to end the year trading at 1.09. 

Key quotes

“We continue to expect the SNB to maintain a vigilant stance regarding the currency, through rapid expansion in the central bank’s balance sheet, despite the scale of the balance sheet remaining a potential concern.” 

“The SNB continues to view the currency as ‘highly valued’. Indeed, according to OECD estimates, the CHF is the most overvalued major vs the EUR, suggesting that SNB intervention will persist as their primary option, rather than conventional or unconventional policy.”

“We continue to view the SNB as intent upon putting a floor under EUR/CHF, at around 1.06, in order to limit disinflationary tendencies and sustain exporter competitiveness.”

“With the Swiss economy closely aligned with Germany and the eurozone as a whole, and the German economy expected to get a boost from the aggressive fiscal expansion, combined with the boost to EUR sentiment following the agreement of the EU 27 on the rescue fund, EUR/CHF remains biased towards a return to 1.09 into year-end.”