Swiss Franc: Strong growth may curb losses against Euro – Rabobank

Jane Foley, Rabobank's Senior FX Strategist, emphasizes Switzerland's outperforming Q2 Gross Domestic Product (GDP) and robust economy, but notes that EUR/CHF has been on a slight upward trend since late May. Foley has adjusted the 9-12 month EUR/CHF target to 0.95 from 0.94, suggesting that strong Swiss growth, low inflation, and zero interest rates could curb upside potential and promote sideways trading.

Nevertheless, today's economic data reassures the Swiss economy's resilience, but hasn't been enough to significantly alter the EUR/CHF's gentle uptrend. While expectations were for a moderate EUR/CHF increase, the movement has exceeded these projections, prompting a modest upward adjustment to forecasts. The Swiss National Bank (SNB) appears content with the weakening CHF value recently.

The SNB has been grappling with the consequences of safe haven inflows into the CHF for years. Just days after the Iran war began, the SNB indicated its readiness to intervene, and recent data suggests intervention might have occurred in Q2, likely in March. The combination of intervention threats and zero policy rates have reportedly diminished the CHF's allure as a safe haven currency in recent months.

The EUR/CHF uptrend received an additional boost from the European Central Bank's June rate hike, with market expectations of further tightening policy possibly next month. In contrast, the market anticipates no SNB rate hike in the next year. Despite years of downside pressure, EUR/CHF has not recovered far from its record lows, indicating the SNB is unlikely to abandon its intervention stance any time soon. The 9-12 month EUR/CHF forecast has been revised to 0.95 from 0.94.