Synopsis:

EUR/CHF has risen toward the upper end of its 0.93-0.95 range as resilient risk appetite and rebounding DM rates have worsened CHF’s rate disadvantage. Credit Agricole expects EUR/CHF to rise towards 0.97 later in 2025 as the Swiss National Bank (SNB) moves toward a zero-interest-rate policy (ZIRP) amid ultra-low inflation.

Key Points:

1. CHF Rate Disadvantage Deepens

   • CHF is under pressure as developed market (DM) rates rebound, exacerbating the negative rate differential.
   • The SNB is expected to maintain near-zero rates this year, reinforcing CHF's role as a funding currency.

2. EUR/CHF Outlook

   • High CHF valuations and contained volatility make it an attractive funding currency.
   • EUR/CHF is expected to rise towards 0.97 later this year, assuming global uncertainties fade and rate differentials widen.

Conclusion:

Credit Agricole sees further CHF weakness ahead, as ZIRP policies, low inflation, and a widening rate differential make it an ideal funding currency. If global risk sentiment remains steady, EUR/CHF should climb toward 0.97 later in 2025.