EUR/CHF likely to drift higher gradually, to trade around 1.11 by end-2017

The victory of Emmanuel Macron in France’s presidential election and his party’s success in French legislative elections have resulted in considerable waning in European-focused event risk. Consequently, the associated reduction in safe-haven-related flows has alleviated the upward pressure on the Swiss Franc, noted Lloyds Bank.

But the election result in the U.K. and beginning of Brexit negotiations guarantee the ongoing uncertainty for Europe as a whole, increasing the likelihood of renewed inflows into the Swiss Franc. Given that the deposit rate is at -0.75 percent, the Swiss National Bank has limited appetite to further lower rates to curtail potential Swiss franc strength in this scenario. Instead, President Jordan has suggested the central bank would continue to use direct FX intervention as the main tool to offset any appreciation in CHF.

“Leaving the risk of a marked rise in inflows aside, we expect EUR/CHF to gradually drift higher, towards 1.11 by end-2017”, added Lloyds Bank.

At 22:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bullish at 53.586, while the FxWirePro's Hourly Strength Index of Swiss Franc was neutral at 0.414913. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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