Although the EUR remain mixed at the moment, compared with the broader perspective, EUR/CHF look attractive to long in dips at this moment.

EUR: Bumpy is the road ahead

EUR: While the EUR remains weak due to underwhelming economic data from Germany and France, and political risks in France, it appears more attractive compared to the CHF. The ECB's concerns about growth and inflation risks, alongside the potential for political instability in France, weigh on the EUR. However, considering the current valuation and relative fundamentals, EUR/CHF presents a good long opportunity, especially at current levels, which may be seen as relatively cheap.

CHF: Grind lower as risk conditions normalize

Although the CHF has shown recent strength, the market still expects EUR/CHF to trade within the range of 0.96-0.99 over the summer. Additionally, historical data suggests that the Summer Olympics tend to slightly reduce realized volatility across G10 FX markets, supporting the likelihood of EUR/CHF remaining largely range-bound. Despite this, it's important to monitor risk aversion indicators, such as gold prices, which could impact CHF.

The Swiss authorities are unlikely to intervene in the FX market at this time, as June's FX reserves data did not indicate any interventions despite significant spot fluctuations. Next week’s Swiss CPI release is also unlikely to present a significant challenge for the CHF. June's slight cooling in inflation already casts doubt on the SNB’s projection of inflation rising to around 1.5% y/y this quarter. Any undershoot in inflation, coupled with a resurgent CHF, could increase the likelihood of another SNB rate cut in September, as domestic money markets are already pricing in.

EUR/CHF 4H

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