EUR/CHF: SNB may have tolerance to see a slump to 1.03 – ING

After trading as high as 1.1150 in March, the rest of the year has been a disappointment for EUR/CHF. Economists at ING are closely watching if the Swiss National Bank (SNB) FX intervention does pick up now that EUR/CHF is trading in the low 1.07s.

Testing the SNB’s tolerance

“We had been bullish EUR/CHF this year on the more constructive global cycle, yet the more mixed global picture and increased ECB dovishness suggest that bullishness will have to be pushed back into 2022 and wait on the turn in the ECB cycle.”

“We’ll be watching to see if SNB intervention picks up here at 1.07 – but last year’s low near 1.05 looks more of a line in the sand – and it could even be nearer 1.03 if the SNB is using the real trade-weighted CHF as a guide.”

“The wild card would be the SNB doing something on rates – e.g. a surprise cut in rates to -1.00%, while protecting domestic banks with greater exemptions from negative rates. Yet SNB speeches are few and far between and such an event risk may not emerge until much closer to September’s SNB meeting.”