The EUR/CHF currency pair is not expected to move away from the 1.12 region on a sustainable basis any time soon, owing to continued Brexit uncertainty and global economic concerns, according to the latest research report from Commerzbank.
Risk-on sentiment is continuing towards the end of the week. Principally we consider that justified in view of the Fed’s calming signals, but we were nonetheless surprised by the speed of the franc’s depreciation yesterday. Honi soit qui mal y pense.
However, any market participant is likely to realise that the SNB welcomes moves such as the one seen yesterday. Inflation data for December published on Wednesday illustrated that the underlying inflation pressure eased again over the past months, which is also likely to be due to the renewed appreciation of the franc over the past year.
Even without the SNB directly taking action on the FX market, the vicinity of the EUR-CHF lows at 1.1184 is increasingly pointing towards asymmetrical exchange rate reactions. The SNB continues to underline after all that it is prepared to intervene on the FX market if necessary.
"This knowledge is likely to make it easier for traders to follow EUR/CHF up moves. That does not mean that the SNB is out of the woods though. The imminent Brexit vote constitutes a high risk event next week which might easily drive up demand for the franc as the favoured currency safe haven in Europe," the report further noted.