Italy's parliament will vote for a new president on Monday, January 24. Economists at ING look at FX implications of different scenarios. The EUR/CHF pair is expected to suffer downside pressure.

Mostly downside risks for EUR/CHF

“Our base case of Draghi moving from prime minister to president of the Republic should prove to be a rather benign one for markets as investors should welcome the fact that he will still overlook the reform process even after next year’s elections. There is, however, not much political risk currently embedded into EUR/CHF, and we, therefore, see some rather contained positive implications from the best-case scenario for markets.”

“We think that if Berlusconi becomes the new president and tensions within the ruling alliance flare-up, we can definitely see some fresh pressure on EUR/CHF.”

“Despite evidence that the SNB has scaled up FX interventions at the start of the year, we doubt there is a clear line in the sand around the current 1.04 level, and a significant rise in Italian political risk can cause EUR/CHF to explore the 1.02/1.03 range. However, this is not our base case.”