EUR/CHF likely to trade around 1.22 by end-2018 – Lloyds Bank

For the first time since the Swiss central bank abandoned the EUR/CHF floor in January 2015, the euro has rallied above 1.18 against the Swiss franc, noted Lloyds Bank in a research report. A quiet geopolitical environment, along with solid global risk appetite has added to the extended move higher in the currency pair in recent months.

Still, the economic data of Switzerland have performed better than market expectations. The third quarter GDP grew sharply, while exports rebounded in November from their fall in the prior month. But inflation continues to be at weak levels. Swiss National Bank Governor Jordan reiterated that, while the Swiss franc has fallen throughout the year, it continues to be overvalued. Furthermore, with inflation expected to reach 2.1 percent in the third quarter of 2020, it would be a “relatively long time” before the central bank has to adjust to monetary policy, added Jordan.

“Given this, and assuming the continuation of a stable risk environment, we forecast gradual EUR/CHF appreciation, to 1.22 by end-2018”, stated Lloyds Bank.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Swiss Franc was highly bullish 142.336, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -166.667. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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