Here's a snippet from Danske on the euro/swiss:
- EUR/CHF is closing in on levels where SNB might step in, which could limit USD/CHF downside
- Our medium-term bias remains for the cross to edge higher on fundamentals but risks remain skewed towards CHF strength near term, as monetary-policy constraints bite and central-bank credibility is set to be tested
- If we are right that the ECB will deliver a significant easing package at the September meeting, it will surely put pressure on the SNB to follow suit, i.e. go further negative and possibly expand its balance sheet further.
- However, that, the SNB (1) revealed its distaste for balance-sheet expansion when abandoning the EUR/CHF floor in January 2015 and (2.) may be closing in on a tipping point for where more negative rates could become counterproductive implies that markets could test the SNB's willingness and ability to deliver. This could send EUR/CHF towards 1.10 again.
- We keep our near-term forecast of EUR/CHF at 1.11 in 1M and 1.11 in 3M and stress that risks to this are asymmetric and on the downside here; we keep our 6M and 12M forecasts unchanged at 1.13 and 1.15, respectively
