EUR/CHF: Limited scope for a substantial recovery even if situation in Ukraine eases – Commerzbank

The war in Ukraine has fueled demand for the Swiss franc as a safe-haven. If the situation in Ukraine eases, the CHF should weaken somewhat again. However, economists at Commerzbank do not see much depreciation potential for the franc.

USD/CHF seen at higher levels again next year

“In our base scenario, we assume that there will be a solution to the Ukraine war in the coming weeks. Against this background, we expect a moderate recovery of EUR/CHF.”

“We do not see much scope for significantly higher levels in EUR/CHF. This is because, from a market perspective, the ECB is likely to act too hesitantly in view of high inflation. In addition, the Swiss National Bank is also likely to raise its key interest rate from September, in line with the ECB.”

“Next year, the disappointment that the ECB has already reached the end of its rate hike cycle is likely to weigh on the EUR. While we do not think the SNB will raise its key rate further either, moderate inflation and solid growth should make the franc look more attractive.”

“Against the USD, the franc should appreciate somewhat in the course of the year, when it becomes clear that the SNB is also initiating the turnaround in monetary policy. However, since the Fed will probably act much more actively, we see USD/CHF at higher levels again next year.”