The Swiss franc keeps on weakening against the euro and is now trading below 1.17. Late last July the EUR/CHF pair jumped from 1.10 to 1.15 and since the pair continues rising. This morning the sight deposits have been released and it seems that at current levels, the SNB is less under pressure. Indeed sight deposits have slightly declined.
There is still nonetheless the fear of deflation and tomorrow will also see the release of the consumer prices for November. Inflation is coming back and we clearly believe it is a matter of time before imports create inflation. The Swiss economy is very resilient and the abandon of the peg is not a bad news any more.
On top of that, the EURCHF should continue to be bullish as markets are still very positive regarding the ECB monetary policy. In addition, even though we believe that the European economic uncertainties will largely weigh on the euro in the longer run. In the short to medium-term, there is a clear possibility to reach 1.20.
By Yann Quelenn