EUR/CHF likely to trade around 1.18 by end-2018 – Lloyds Bank

The euro has been confined to a narrow 1.15 to 1.17 range against the Swiss franc since the middle of June, noted Lloyds Bank in a research report. The EUR/CHF pair, in recent weeks, has dropped towards the lower bound of this range, driven by clarification by the European Central Bank on its policy intentions and a deterioration in global risk appetite.

Following the July meeting, ECB President Draghi implied that rates were just likely to be raised after August 2019, which the market interpreted as ‘dovish’. More recently, the rise of international trade tensions has seen a ‘safe-haven’ undertone to some market dynamics.

Combined, these developments have pressured EUR/CHF, stated Lloyds Bank. Yet, from the range lows, there are upside risks to the pair. The base case for global growth implies a restricted effect from ‘trade wars’. Furthermore, with Swiss inflation weak, and the Swiss National Bank still worried about currency strength, tightening in the near term seems unlikely.

“As such, there is every chance of the German-Swiss interest rate differential widening, which supports our forecast for EUR/CHF to reach 1.18 by year-end”, added Lloyds Bank.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bullish at 70.4193, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -18.4044. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex