CIBC FX Strategy Research notes that over the past twelve months, Swiss FX reserves have swelled by nearly 20% as the central bank has tried to contain CHF appreciation.
In particular, CIBC notes that in the face CHF safe-haven flows on the recent political risks, with elections in the Netherlands and France as well as US relations with North Korea, the SNB has been acting to oppose that and prevent EURCHF from falling below 1.07.
However, as political risks is abated after the passing of these events, CIBC argues that the SNB may not need to act as forcefully from here anyway.
In addition, CIBC thinks that the EUR should benefit over the coming months with the Eurozone economy improving, and with the ECB will likely en-route to scale back its expansive monetary policy.
“As such, we expect EURCHF to gradually head higher,” CIBC concludes.
EUR/CHF is trading circa 1.09 as of writing.
Source: CIBC Economics – CIBC Capital Markets
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