EUR/CHF: Sluggish reaction to reduced EZ political risk - ING

The removal of French Presidential risk has been greeted by EUR/CHF with a move back to levels seen last October and Chris Turner, Research Analyst at ING suggests that they would expect some of this year’s safe haven purchases of CHF to soon reverse.

Key Quotes

“SNB data show that foreigners acquired an extra CHF20bn in CHF sight deposits in the first 3 months of this year. It would be no surprise to see it unwind.”

“Domestically the SNB are still focusing on spare capacity and inflation not sustainably moving above 1% until 2019. We suspect the SNB will eagerly await the ECB tapering debate – and having chosen to abandon the floor in the face of forthcoming ECB QE in early 2015, will be expecting a EUR/CHF rally on ECB tapering.”

“Italian elections will prove a risk in 1Q18, but for the rest of 2017 we see momentum behind EUR/CHF and are raising our forecasts.”