Q3 Earnings Alert! Plan early for this week’s stock reports with all key data in 1 placeSee list

UBS sees EUR/CHF slipping amid rate cuts

EditorTanya Mishra
Published 08/27/2024, 12:55 PM
© Reuters.
EUR/CHF
-

UBS has revised its forecast for the EUR/CHF currency pair, anticipating a slight decline to 0.93 in the second half of 2024. The global economy's soft landing has been favorable for the Euro, but Europe's disappointing growth prospects have capped the pair's rise. After recovering from a dip to 0.92 at the start of August, the EUR/CHF has stabilized around 0.95.

The Swiss National Bank (SNB) is expected to make one final interest rate cut in September, concluding its easing cycle while other central banks may continue to ease. The European Central Bank (ECB) is predicted to decrease its interest rate by at least another 50 basis points this year, which would narrow the rate differential with Switzerland and potentially support the Swiss Franc (CHF).

Economic growth on the continent has been stagnant, and fiscal consolidation efforts are likely to mitigate the positive effects of lower rates. Additionally, the uncertainty from political developments over the summer is expected to maintain high uncertainty, favoring the CHF over the EUR.

Despite the Euro being supported by the decline in global yields, the lack of enthusiasm in the Eurozone from both a growth and geopolitical standpoint is likely to drive the EUR/CHF lower in the coming months.

The main risk identified by UBS is the central bank's reaction to a rapid appreciation of the CHF. Speculation about foreign exchange interventions by the SNB was noted in early August, but UBS believes the central bank will continue to prioritize interest rates while they remain in restrictive territory.

In terms of investment considerations, UBS has moved away from its previous guidance of a 0.95-1.0 range for EUR/CHF. The firm now sees the currency pair grinding lower, with resistance expected in the 0.96-0.97 range and support near 0.92.

However, if growth in Switzerland weakens more than anticipated, or if the SNB signals its discontent with CHF strength and takes action to weaken it, the EUR/CHF could potentially remain around 0.95, UBS noted.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.