The franc should remain solid and below parity with the euro in the coming months. To slow inflationary trends, the Swiss National Bank (SNB) is no longer curbing the appreciation of the national currency as much, Raiffeisen economists said on Tuesday.
The euro-franc currency pair fell below parity in early July, a level below which it has been moving ever since. After a low of 0.9694 EUR/CHF at the end of July, the Swiss currency traded around 10:30 a.m. at 0.9748 francs for one euro. At the start of the year, the franc was still worth 1.0379 euros.
‘The SNB no longer considers that the Swiss franc is overvalued’ and therefore ‘no longer fights with all its might once morest an increase’ in the Swiss currency, underlined the specialists of the St. Gallen bank in a study. This is all the more true as a stronger franc curbs imported inflation, they added.
Faced with fears of recession due to the war in Ukraine and the risk of energy shortages this winter in Europe, the trend should not change any time soon. On a 12-month horizon, Raiffeisen sees the currency pair at 0.98 EUR/CHF.
In this context, the SNB might well somewhat delay the normalization of its monetary policy and the exit from negative interest rates.
Planed Growth Forecast
The situation is reversed once morest the dollar, the US Federal Reserve (Fed) supporting the greenback with its sharp hikes in key rates. But following the United States slipped into technical recession in the 2nd quarter, the US central bank should slow down the pace of its interventions and the dollar will calm its enthusiasm. Over three months, the dollar-franc currency pair should rise to 0.98 USD/CHF and over 12 months to 0.95 USD/CHF, once morest 0.9527 currently.
In terms of growth projections, Raiffeisen economists have revised down their outlook for the Swiss economy. Gross domestic product (GDP) should only grow by 1.9% this year, while previous projections showed growth of 2.2%. Forecasts for 2023 (+1.5%) remain unchanged.
While private consumption and public spending should still support growth in 2022, investment in capital goods and construction should clearly slow down, as should exports.
‘The clouds are becoming more numerous on the economic horizon with the end of the post-Covid catch-up effect and the surge in inflation’, warned the authors of the study. Europe is particularly penalized by the energy crisis, even if in Switzerland summer tourism is still currently driving growth.
/ATS
