Danske Research discusses EUR/CHF outlook and adopts a neutral bias in the near-term, while maintains a constructive bias in the medium-term.
"EUR/CHF has been relatively steady lately, notwithstanding the latest ECB-induced volatility. With the ECB sidelined, the case for EUR upside has been postponed. Near term, risk sentiment is set to remain fragile which could deliver pockets of safe-haven demand and benefit the CHF. However, we expect a China-led stabilisation by mid-year, led by dovish central banks, a trade deal and a ‘decent Brexit’, which should support EUR/CHF.
However, a sustained break higher would require ECB support, which now seems far away. As a result, the SNB will be stuck with an empty toolbox and a below-target inflation for an extended period. There is also a risk that the market could test the SNB’s willingness to do more and send EUR/CHF towards 1.10 again. But, in our case base, where economic and political risks are set to clear in Europe, we still see some limited upside potential in the cross," Danske notes.
"We project EUR/CHF at 1.12 in 1M, 1.13 in 3M, 1.15 in 6M, and 1.17 in 12M," Danske adds.