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Nov 22 - 06:55 PM

CHF: To Remain Elevated In Q4 21 And Q1 22; 1.05 Remains The Line In The Sand For SNB Intervention - Barclays

By eFXdata  —  Nov 22 - 03:00 PM

Barclays Research discusses CHF outlook over the medium-term.

"We expect CHF to remain elevated in Q4 21 and Q1 22 given its safe haven status and real yield appeal, before it weakens, as the SNB lags other central banks in rate normalisation leading to widening rate differentials. Despite a benign risk backdrop, stagflation concerns are unlikely to recede given slowing growth and more persistent inflation, and we expect this to keep the franc broadly supported in the near term. Switzerland’s low inflation is also appealing as it leads to less real yield erosion," Barclays notes. 

"While SNB’s comment on higher CHF curbing inflation suggests the Bank’s comfort with some modest CHF strength, we believe EURCHF 1.05 remains the line in the sand for SNB interventions, especially if expectations of ECB normalisation triggers a significant widening of BTP-Bund spreads. Despite Macron’s lead in the polls, a crowded race is likely to weigh on EURCHF ahead of the French election scheduled for April 2022," Barclays adds. 

Source:
Barclays Research/Market Commentary

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