EUR/CHF likely to continue trading at around 1.09 in medium-term

In the medium term, the EUR/CHF pair is likely to continue trading in a range of about 1.09, said Commerzbank in a research report. It appears that the European Central Bank is no long attempting to weaken the euro, and the Swiss franc is not much in demand as a safe haven currency post the Brexit vote.

While the Swiss franc is expected to remain under appreciation pressure against the euro, the Swiss National Bank will want to avert a sharp gain. However, when using moderate intervention as a monetary policy tool, the Swiss central bank would be compelled to accept an additional expansion of its balance sheet.

At certain point the SNB would have to leave this strategy and would be unable to oppose the market any longer, according to Commerzbank. If the Swiss National Bank abandons this strategy, this might result in a price jump that was seen in January 2015. This would then cause the pair EUR/CHF to decline. It is difficult to estimate the timing of such a downward movement; however, the risk of this occurring remains, added Commerzbank.