The EUR/CHF pair has broken above the 0.9500 level again. Economists at OCBC Bank analyze the outlook for the pair.
Eurozone growth will stabilize in the second half of the year
While the SNB may not pursue a firm currency policy, the euro could also come under pressure in the short term due to lackluster economic activity in the eurozone region, the growing risk of a rate cut cycle of the ECB ahead of schedule (possibly as early as April 2024) and to electoral risks in Europe.
In net terms, the negative effects on the euro and the Swiss franc could offset each other during the first half of the year. But in the second half of 2024, we expect eurozone growth to stabilize and the ECB's rate cut cycle to be more modest (our internal view sees a 75 basis point cut in 2024), while the SNB could start the rate cut cycle in the second half of 2024 (market expectations).
The policy divergence between the ECB and the SNB, the stabilization of growth in the Eurozone and the SNB's pursuit of a weak CHF may support an upward trajectory of EUR/CHF.
EUR/CHF – March 24 in 0.9460, June 24 in 0.9540, September 24 in 0.9790, December 24 in 0.9990, March 25 in 0.9990.
Source: Fx Street
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