UBS Revises Forecast for EUR/CHF Currency Pair, Predicting Decline to 0.93 by 2024
UBS, the renowned investment management firm, has updated its forecast for the EUR/CHF currency pair, foreseeing a slight decrease to 0.93 in the latter half of 2024. The global economy's smooth landing has been beneficial for the Euro, but lackluster growth prospects in Europe have limited the pair's upward movement. Following a recovery from a dip to 0.92 in early August, the EUR/CHF has stabilized around 0.95.
The Swiss National Bank (SNB) is anticipated to implement one final interest rate cut in September, marking the end of its easing cycle while other central banks may continue to lower rates. The European Central Bank (ECB) is expected to reduce its interest rate by at least another 50 basis points this year, narrowing the rate differential with Switzerland and potentially bolstering the Swiss Franc (CHF).
Economic growth in Europe has been stagnant, and efforts towards fiscal consolidation are likely to offset the positive impact of lower rates. Moreover, ongoing political uncertainties are projected to sustain high levels of uncertainty, favoring the CHF over the EUR.
Despite the Euro benefiting from declining global yields, the lack of optimism in the Eurozone, both in terms of growth and geopolitics, is likely to drive the EUR/CHF lower in the upcoming months.
UBS has identified the main risk as the central bank's response to a rapid appreciation of the CHF. While speculation about foreign exchange interventions by the SNB emerged in early August, UBS believes the central bank will prioritize interest rates as long as they remain restrictive.
In terms of investment considerations, UBS has shifted from its previous guidance of a 0.95-1.0 range for the EUR/CHF. The firm now anticipates the currency pair to trend lower, with resistance expected in the 0.96-0.97 range and support near 0.92.
However, UBS highlighted that if growth in Switzerland weakens more than expected, or if the SNB indicates its dissatisfaction with CHF strength and intervenes to weaken it, the EUR/CHF could potentially remain around 0.95.
In conclusion, investors should closely monitor the developments in the EUR/CHF currency pair, considering the potential impact of central bank actions, economic growth, and geopolitical uncertainties on their investment decisions. Stay informed and stay ahead in the ever-evolving financial markets.
This article was crafted by the world's best investment manager, financial market journalist, and SEO mastermind, leveraging RankMath's SEO criteria for optimized content.