Swiss franc forecast – Photo from pixabay.com
The ECB cut interest rates, but before that the Swiss Bank had already done so during the month of March. ECB President Christine Lagarde said interest rates would not follow a linear reduction path and that bankers could wait more than one meeting before making further cuts. Despite the recent rate cut, the ECB has not committed to further policy easing, due to persistent wage growth and rising inflation forecasts. Lagarde stressed that there may be periods when rates remain stagnant and that further cuts will depend on data on wages, corporate profits and productivity. Markets expect few rate cuts this year and several by the end of 2025.
Forecasts
UBS, during the month of May, revised downwards its forecasts for the EUR/CHF currency pair. Where is the Swiss franc headed according to the Swiss Bank? The target was reduced from 0.97 to 0.96, and for June 2025 it was set at 0.96. In recent months, the EUR/CHF exchange rate has risen thanks to positive economic data in the Eurozone and carry-trade operations that led to the sale of Swiss francs. However, UBS expects this rally to be close to its peak. The anticipation of interest rate cuts by the ECB could cause the exchange rate to spike. The Swiss Bank perceives the current exchange rate as unstable, due to the high volume of short positions on the Swiss franc, suggesting caution for the future, as the recent rate cut and ECB policy changes could affect the euro and the Swiss franc.
Interest rates
The Swiss economy is expected to grow 1.5%, while the US economy will slow from 2.4% to 1.4% next year. The Swiss National Bank (SNB) is expected to reduce interest rates by 50 basis points by September.
The exchange rate has moved around 0.96 in recent days. Since the beginning of the year, it has marked the minimum at 0.9270 and the maximum at 0.9930. The Alligator Indicator on the daily and weekly time frames is set bearish/sideways with bearish divergences on our short and medium to long term oscillators. The downward hold in the next few days of the 0.9722 area (high of 5 June) could lead prices towards 0.9566 (low of 19 April) and then subsequently towards 0.9473 (high of 22 January 2024). To date, based on our calculations, the probability that we can go towards 0.9254 of December last year is high.
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