© Lutz Karpowitz
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Over the last few weeks Switzerland's macroeconomic data have been surprising on the upside. It is positive for the nation's economy; however, it might cause some problems for the Swiss National Bank in the future. I would agree that Swiss is experiencing really strong economic growth at the moment; nevertheless, there are still some problems on the housing market.
What kind of events and decisions could determine the Swiss Franc performance?
On the one hand, the EUR/CHF is blocked to the downside as the SNB has set the minimum exchange rate at CHF 1.20 per Euro and currently the currency pair is trading around 1.22 level. On the other hand, the Swiss Franc's function as a safe haven is limited, because of the cap set for EUR/CHF by the SNB. The upside potential is also rather limited as Switzerland is having a solid growth and that will favor its economy over the Eurozone's. Also, an important driver for EUR/CHF, which might lead to higher exchange rates, is the European debt crisis that is somewhat out of the market focus at the moment, meaning that there is less demand for the safe haven currencies as the Swiss Franc. When it comes to this pair's fair value, I think that there is some overvaluation in the Franc, and in the medium term that might lead to some higher rates in EUR/CHF.
What are your forecasts for USD/CHF and EUR/CHF for longer and short term and what kind of trends do you expect next year?
Our forecast for EUR/CHF for the end of the year 2014 is 1.28, it is not really skyrocketing; although, it is higher from the current level. For the year of 2015 we expect rather sideways movement for this currency pair. For USD/CHF we forecast that it will reach parity by the end of the year 2014 and it will touch 1.06 in the year of 2015.
As I said previously the overvaluation of the currency will put some pressure on the Franc in the medium term, yet the main trend will be set by the monetary policy. The ECB decisions will be of a high importance. Also, if the SNB sticks to the floor, which is set at 1.20 for EUR/CHF, then they cannot adopt independent monetary policy. They have to choose between fixed exchange rate and independent monetary policy. We do not expect another rate cut and that means there will not be too many additional measures coming from the ECB side. That is why we expect that the Swiss Franc will lose some ground against the 17-nation currency.