EUR/CHF Risks Grinding Lower – Rabobank
Jane Foley, Senior FX Strategist at Rabobank, believes the cross could slip toward lower levels in the next periods.
“15 months after being forced to walk away from its EUR/CHF 1.20 exchange rate floor, the SNB is still struggling to contain an overvalued exchange rate”.
“According the SNB Board member Maechler negative interest rates are a necessity, not a choice. This can be illustrated by continued deflationary pressures evident in the -0.9%y/y March CPI inflation rate and in the 1.1%m/m drop in March real exports”.
“The SNB has this year repeated its threat to intervene in the FX market to offset unwanted inflows”.
“While the relatively poor performance of the CHF as a safe haven last summer suggests that the SNB has had some success, the unit is unlikely to soften significantly unless world growth improves markedly and geopolitical risks decline”.