Monetary policy divergence between the euro area and Switzerland should continue to weigh on the EUR/CHF pair. Economists at Credit Suisse revise their EUR/CHF target from 1.0650 to 1.0500, as SNB FX intervention might be less aggressive going forward.

Further decline in euro area real yields should continue to weigh on EUR/CHF

“Real yields in the euro area should resume their downward trend, which could weigh on EUR/CHF.”

“We believe that the appreciation of the Swiss franc versus the euro will likely continue from here. Consequently, we lower our current target of 1.0650, which we narrowly missed last week, to 1.0500. We would consider ourselves wrong at levels above 1.0974.”

“The risk to our view would be a more aggressive SNB FX intervention policy instead of just smoothing the accelerating trend in the Swiss franc. Higher wage growth in the euro area, albeit not visible yet, is another risk factor as such a development could lead to a more hawkish ECB and higher yields in the euro area than in Switzerland.”