Swiss Franc: Mixed outlook against Euro around French spread moves – ING

Chris Turner at ING says EUR/CHF is consolidating after a sharp fall driven by French debt concerns that dampened ECB tightening expectations. Markets still price further rate hikes, and ING sees it as too early to cancel 2027 ECB hikes. The bank flags a possible correction to 0.9230/0.9250, while calmer periods could see EUR/CHF trade back to 0.9350/0.9400.

Range scenarios tied to French spreads

"EUR/CHF is consolidating after its heavy fall just over a week ago. That move was driven by French debt problems being severe enough to curtail European Central Bank tightening expectations."

"However, it is not clear that short-dated euro rates need to fall a lot further from here, unless we see a sharp drop in energy prices."

"Currently, the market prices 22bp of hikes in December (we look for a 25bp hike) and then a further 30-40bp of tightening into next year."

"With eurozone inflation still pushing higher (September eurozone CPI should be confirmed at 3.8% year-on-year this week), it seems too early to expect 2027 hikes from the ECB to be cancelled."

"This all adds up to a mixed picture for EUR/CHF. We cannot rule out a correction to the 0.9230/50 area should the OAT-Bund spread decisively push through the 150bp area, but any brief periods of calm can see EUR/CHF trade back up to 0.9350/9400."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)