It looks like G10 policy rates (ex-Japan) are going lower, ING’s FX analysts Francesco Pesole and Chris Turner note.

EUR/CHF may struggle to stay above 0.95

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

“We also think the SNB pays close attention to the real CHF. At the end of July, it was still some 4% off the highest levels seen in January 2024 and suggests the SNB may not emerge with strong verbal intervention until EUR/CHF is closer to the 0.91 area.”

“Geopolitics also means

Even as speculative unwinds look largely done, rising geopolitical tensions in the Middle East and Russia should be watched as it could bolster safe haven demand for CHF and JPY, DBS FX & Credit Strategist Chang Wei Liang notes.

SNB introduces a floor for EUR/CHF

“Egypt’s aviation ministry instructed all airlines to avoid Iran airspace due to military drills, while Ukraine staged a surprise military incursion into Russia. We are cautious that further strength in CHF could trigger an unexpected policy reaction.” 

“Unlike the undervalued JPY, CHF is highly overvalued. Recent CHF gains have extended its overvaluation towards the Aug 2011 record high based on our DEER model, which subsequently prompted SNB to introduce a floor for EUR/CHF.” 

“Yesterday, Swissmem put