Distribute compression to weigh – ING

G10 (ex-Japan) policy rates appear to be falling, note ING FX analysts Francesco Pesole and Chris Turner.

EUR/CHF may struggle to stay above 0.95

“We are looking for at least another 125bp of ECB easing next summer, if not 175bp. However, Switzerland is closer to the zero-bound constraint and markets are reluctant to price the Swiss National Bank’s policy rate below 0.50% – just 75bps lower than current levels. Spread compression could therefore weigh on EUR/CHF through 2025.”

“We also believe that the SNB is paying close attention to the real CHF. At the end of July, it was still around 4% off the highs seen in January 2024 and suggests that the SNB may not come out with strong verbal intervention until EUR/CHF approaches the 0.91 area.”

“Geopolitics also means that EUR/CHF may struggle to stay above 0.95.”