CIBC discusses EUR/CHF outlook and targets the cross around 1.09 by year-end.
"Over the last four weeks there has been an acceleration in the accumulation of sight deposits, with the rebound being a function of EUR CHF testing the 100day MAV of around 1.0620 in early July. We continue to expect the SNB to maintain a vigilant stance regarding the currency, through rapid expansion in the central bank’s balance sheet, despite the scale of the balance sheet remaining a potential concern," CIBC notes.
"We continue to view the SNB as intent upon putting a floor under EUR CHF, at around 1.06, in order to limit disinflationary tendencies and sustain exporter competitiveness. In terms of inflation, Swiss HICP dipped to a four year low of -1.3% in June, while business sentiment has only rebounded modestly from all-time lows. With the Swiss economy closely aligned with Germany and the eurozone as a whole, and the German economy expected to get a boost from the aggressive fiscal expansion, combined with the boost to EUR sentiment following the agreement of the EU 27 on the rescue fund, EUR CHF remains biased towards a return to 1.09 into year-end," CIBC adds.