UBS has revised its forecast for the currency pair, anticipating a slight decline to 0.93 in the second half of 2024. The soft landing of the global economy has been good for the euro, but Europe’s disappointing growth prospects have limited the pair’s rise . After recovering from a dip to 0.92 in early August, the EUR/CHF has stabilized around 0.95.
The Swiss National Bank (SNB) is expected to make a final rate cut in September, completing the easing cycle, while other central banks may continue easing. The European Central Bank (ECB) is forecast to cut its interest rate by at least another 50 basis points this year, which would narrow the interest rate differential with Switzerland and potentially support the Swiss Franc (CHF).
Economic growth on the continent has stagnated and fiscal consolidation efforts are likely to mitigate the positive effects of lower interest rates. Moreover, uncertainty due to political developments during the summer is expected to keep uncertainty high, favoring the CHF against the EUR.
Although the euro is supported by the decline in global interest rates, the lack of enthusiasm in the eurozone, from both a growth and geopolitical perspective, is likely to drive EUR/CHF lower in the coming months.
The main risk identified by UBS is the central bank’s response to a rapid appreciation of the CHF. There was speculation in early August about currency interventions by the SNB, but UBS believes the central bank will continue to prioritize interest rates as long as they remain in restrictive territory.
On investment considerations, UBS has deviated from its previous guidance of a range of 0.95-1.0 for EUR/CHF. The company now sees the currency pair falling, with expected resistance in the range of 0.96-0.97 and support near 0.92.
However, if growth in Switzerland weakens more than expected, or if the SNB expresses dissatisfaction with the strength of the CHF and takes action to weaken it, EUR/CHF could potentially remain around 0.95, UBS noted .
This article was produced with the support of AI and reviewed by an editor. For more information see our General Terms and Conditions.
