Swiss franc likely to appreciate against euro, to trade around 1.22 by end-2018 – Lloyds Bank

The Swiss franc has rallied robustly against the euro in recent weeks following its hit to its weakest level since early 2015. The CHF had appreciated nearly 3 percent, as greater nervousness among international investors after the noticeable decline in equity prices resulted in a rise in the demand for ‘haven’ currencies. But, its flow-driven move might not last if markets continue to stabilize, noted Lloyds Bank in a research report.

Fundamentally, Swiss economic data continue to be comparatively strong. The third quarter GDP growth accelerated sharply and exports in December surged 2.8 percent sequentially to their highest level since last August.

But inflation continues to be weak. SNB Governor Jordan repeated that, while the Swiss franc has weakened, it continues to be overvalued. Furthermore, with inflation expected to reach 2.1 percent in the third quarter of 2020, it would be “relatively long time” before the SNB has to adjust policy, noted Jordan.

“Given this, and assuming a return to a stable risk environment, we forecast EUR/CHF to appreciate to 1.22 by end-2018”, added Lloyds Bank.

At 21:00 GMT the FxWirePro's Hourly Strength Index of Swiss Franc was bearish at -75.6931, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -81.2749. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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