Chris Turner at ING says EUR/CHF is effectively being driven by European Central Bank (ECB) expectations, as the Swiss National Bank (SNB) is seen keeping policy unchanged despite some tightening priced in. Softer Eurozone data could limit ECB hikes and pressure EUR/CHF below key support levels. The SNB’s tolerance line near 0.90 and Switzerland’s relatively resilient energy profile also shape the cross’s downside.

SNB on hold leaves cross ECB-driven

"It seems clear that the Swiss National Bank is not going to do anything with monetary policy anytime soon. Earlier in the year, the debate was whether it needed to take its policy rate – now at 0% – into negative territory. With the oil price spike, that flipped expectations towards SNB tightening and indeed 20bp of tightening is priced in by year-end."

"We cannot see the SNB tightening this year at a time when it says it wants to intervene more intensively against the strong Swiss franc."

"With SNB policy going nowhere, EUR/CHF is therefore being dragged around by the ECB tightening story. If the next chapter sees softer eurozone activity data raising questions over how much the ECB really needs to tighten after all, then EUR/CHF risks are skewed lower."

"Under 0.9125/35, EUR/CHF can drift under 0.9100. But 0.90 remains the line in the sand for the SNB."

"It's worth remembering as well that Switzerland has some of the least fossil fuel-intensive industries in Europe, suggesting the economy may perform better relative to European peers this year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)