EUR/CHF: Selling the rally remains risky, a gradual climb towards parity is a more likely outlook – ING
The Swiss Franc (CHF) was dealt a blow on Thursday as the Swiss National Bank unexpectedly cut rates by 25 bps. Economists at ING analyze CHF outlook.
SNB cut paves the way for more CHF weakness
We think cuts in June and September now look likely. That would take the policy rate in Switzerland back to 1%, with another move potentially lowering it to 0.75%.
The EUR-CHF rate gap – a key driver of EUR/CHF – is set to prove supportive for the pair beyond the short term. We suspect markets are wrong in pricing in more than 75 bps of easing by the ECB this year, while the SNB rate expectations can face further dovish repricing.
Crucially, the SNB’s policy statement made two references to the strength of the Franc in real terms, meaning the FX intervention tool can now be used to weaken the currency.
Things may quiet down in EUR/CHF now, especially as markets may incline to price in more cuts by the ECB, but selling the rally in the pair remains risky, and a gradual climb towards parity is a more likely outlook.
Reprinted from FXStreet,the copyright all reserved by the original author.
Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.
FOLLOWME Trading Community Website: https://www.followme.com
Hot
No comment on record. Start new comment.