EUR/CHF en route to 1.20 - ING

EUR/CHF continues to post fresh highs and is trading almost touching distance away from 1.20 – the level which the SNB had fixed the currency pair at prior to abandoning the peg in Jan 2015, according to Viraj Patel, Research Analyst at ING.

Key Quotes

“Though the perennially dovish SNB and CHF’s funding currency appeal amid returning carry appetite are logical explanations, we note two more unusual factors that might also account for its recent under-performance: (1) US sanctions on Russian-related Swiss investments (note 14% of total Russian cross-border outflows in 2017 were to Switzerland – almost 3 times that of the US); and (2) the ‘Vollgeld Initiative’ referendum on June 10 – a contentious, and potentially detrimental, national vote on whether to abandon the current fractional-reserve banking system. Swiss FinMin Maurer presented the government’s arguments against the proposal yesterday, while the SNB also argue that ‘growth and prosperity could be jeopardised’ under this new radical system. Both reasons are providing food for thought for CHF investors.”