UBS Predicts EUR/CHF to Decline to 0.93 by Second Half of 2024
UBS, the renowned investment firm, has revised its forecast for the EUR/CHF currency pair, expecting a slight decline to 0.93 in the latter half of 2024. The global economy’s soft landing has been beneficial for the Euro, but Europe’s lackluster growth prospects have limited the pair’s upward movement. Following a rebound from a low of 0.92 in early August, the EUR/CHF has stabilized around 0.95.
The Swiss National Bank (SNB) is anticipated to implement one final interest rate cut in September, marking the end of its easing cycle while other central banks may continue with easing measures. The European Central Bank (ECB) is forecasted to reduce its interest rate by at least 50 basis points this year, narrowing the rate differential with Switzerland and potentially bolstering the Swiss Franc (CHF).
Stagnant economic growth in Europe, coupled with fiscal consolidation efforts, is expected to offset the positive impact of lower rates. Moreover, ongoing political uncertainties are likely to sustain high levels of uncertainty, favoring the CHF over the EUR.
Despite the Euro being supported by the decline in global yields, the lack of optimism in the Eurozone from both economic and geopolitical perspectives is likely to drive the EUR/CHF lower in the upcoming months.
UBS has identified the central bank’s reaction to a rapid CHF appreciation as a key risk. While speculation about foreign exchange interventions by the SNB emerged in early August, UBS believes that the central bank will prioritize interest rates as long as they remain at restrictive levels.
In terms of investment advice, UBS has shifted away from its previous guidance of a 0.95-1.0 range for EUR/CHF. The firm now anticipates the currency pair to trend lower, with resistance seen around 0.96-0.97 and support near 0.92.
However, if Switzerland’s economic growth weakens more than expected, or if the SNB indicates displeasure with CHF strength and takes steps to weaken it, the EUR/CHF could potentially hover around 0.95, according to UBS.
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Analysis: UBS has revised its forecast for the EUR/CHF currency pair, predicting a slight decline to 0.93 by the second half of 2024. Factors such as the global economy’s soft landing and Europe’s disappointing growth prospects have influenced this revision. The Swiss National Bank is expected to make one final interest rate cut in September, while the European Central Bank may decrease its rate further. Economic stagnation in Europe and political uncertainties are likely to favor the Swiss Franc over the Euro. Investors should be cautious about the potential risks and consider UBS’s updated guidance for the EUR/CHF pair.