EUR/CHF: Policy divergence between ECB-SNB to support upward trajectory – OCBC

EUR/CHF has moved back above the 0.9500 level. Economists at OCBC Bank analyze the pair’s outlook.

Euro Area growth to stabilise in the second half of the year

While SNB may not pursue a strong FX policy, the EUR may also come under pressure in the near term owing to lacklustre economic activities in the Euro Area region, growing risk of an earlier than expected ECB rate cut cycle (possibly as early as in Apr-2024) and election risks in Europe. 

On net, the negative effects for EUR and CHF may offset each other for 1H. But into 2H 2024, we are expecting Euro Area growth to stabilise, and the ECB rate cut cycle to be more modest (our house view expects 75 bps cut for 2024) while SNB may potentially begin rate cut cycle in 2H 2024 (market expectation). 

The policy divergence between ECB-SNB, growth stabilisation in Euro Area and SNB’s pursuit for not a strong CHF can potentially support an upward trajectory for EUR/CHF. 

EUR/CHF – Mar-24 0.9460 Jun-24 0.9540 Sep-24 0.9790 Dec-24 0.9990 Mar-25 0.9990