Societe Generale Cross Asset Strategy Research notes that while the largest monthly move in EUR/CHF since the SNB franc cap policy was abandoned in January 2015 may have been celebrated in Zurich, it was also an indictment of the SNB’s unconventional policies.
“The combination of negative interest rates through the 10-year tenor and a burgeoning central bank balance sheet in Switzerland failed utterly to weaken the Swiss franc….What finally weakened the franc is a combination of mounting ECB tightening expectations, euro appreciation, and narrowing European peripheral spreads,” SocGen argues.
Looking ahead, SocGen argues that further upside in EUR/CHF is likely on the back of continued buoyant global risk sentiment, European peripheral tightening and the ECB marching towards policy normalization in the Fall.
On the technical front, SocGen’s strategists have highlighted the bullish confirmation of an inverse head-and-shoulders pattern in EUR/CHF (see here).
“We think EUR/CHF 1.20 is likely to be achieved by 1Q18,” SocGen adds.
Source: Societe Generale Cross Asset Research
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