EUR/CHF to trade in a range between 1.06 and 1.10 this year – Lloyds Bank

The research team at Lloyds Bank expects EUR/CHF to trade in a range between 1.06 and 1.10 for most of the year.

Key Quotes

 “Amid heightened political uncertainty, primarily related to European developments, an increase in haven-related flows continued to place upward pressure on the Swiss franc in the early part of 2017. The increase in the SNB’s holdings of foreign currency reserves suggests that the central bank has used foreign exchange interventions as a means of slowing the rate of appreciation in the currency.”

“Upcoming elections in France, alongside Brexit negotiations, suggest that political event risk is likely to remain elevated this year. With the deposit rate already at -0.75%, we believe the SNB is likely to refrain from lowering interest rates further to curb the rise of its currency. Instead, SNB President Thomas Jordan has pledged to continue using direct FX intervention as the primary tool to offset currency strength. In the absence of a marked rise in inflows, this should be sufficient to keep EUR/CHF in a range between 1.06 and 1.10 for most of the year.”