EUR/CHF Outlook:
Bearish, as the pair is below its recent average and near recent lows, facing pressure from key developments.
Key drivers:
• Rate gap: The European Central Bank (ECB) is maintaining interest rates amid low inflation, while signs suggest potential negative rates may return in Switzerland to curb the strong Swiss franc.
• Risk/commodities: Oil prices are significantly above average, which has historically influenced the EUR negatively via higher import costs for the Eurozone.
• One macro factor: Switzerland's strong currency poses risks to its trade balance, potentially impacting its economic stability.
Range:
EUR/CHF is likely to drift within its recent range, struggling with downward pressure.
What could change it:
• Upside risk: A shift in the economic outlook or reduced expectations of negative rates from the Swiss National Bank could support the euro.
• Downside risk: Continued strong performance from the Swiss franc alongside economic challenges in the Eurozone could exacerbate EUR weakness.
