EUR/CHF could test 1.18 in the near term – Danske Bank

Christin Tuxen, Chief Analyst at Danske Bank, believes the Swiss Franc could depreciate to the 1.18 area vs. the single currency in the short term horizon.

Key Quotes

“CHF has weakened following the clearing of geopolitical risks in relation to North Korea, and as sentiment in equity markets has recovered in recent weeks. In our view the market currently ignores that the road to exit for the SNB entails more steps than that of the ECB: fading SNB intervention is only a first step in the SNB’s 'normalisation' process; the next step will be for the SNB to stop characterising CHF as ‘highly valued’ – and we are not there yet”.

“However, with EUR/CHF still not on a sustainable path above 1.20, risking the recovery with exit talk is not a route we deem the SNB will want to go down. We think the SNB will remain on the sidelines on further steps towards ‘normalisation’ for now, which should allow EUR/CHF to edge firmly into the 1.20s this year amid a continued ECB ‘normalisation’ process”.

“We have adjusted our short-term forecast profile a tad higher , looking for 1.18 in 1M, 1.19 (1.17) in 3M, 1.21 (1.20) in 6M and 1.23 (unchanged) in 12M”.