EURCHF on a collision course with EURCHF “floor”
EURCHF continues to grind lower, increasing the speculation that it’s only a matter of time till the SNB will have to step-up and defend the EURCHF “floor”. On the fundamental front, given the erosion in European economic data it’s increasingly likely that the ECB will engage in some type of policy that will debase the EUR (potentially expanding the banks’ balance sheet by as much as €1 trillion). The recovery of Swiss KoF leading indicator to 99.8 from 99.1 indicates that pace of economic cooling remains mild. Finally, despite the FOMC ending QE, guidance indicates that the zero interest rate policy would remain “for a considerable time”, meaning the upward moment in USD should taper. Overall, it’s unlikely that strength in USD will outweigh weakness in the EUR hence creating demand pressure on the CHF (pushing EURCHF to 1.20).
Read the full report: FX Research