Bank of America FX Strategy Research notes that the month of March has been relatively uneventful for the CHF, which has traded in narrow ranges both versus EUR and in TWI terms.
In this regard, BofAML argues that the SNB's policy of EUR/CHF containment has proved a success so far and believes that EUR/CHF should head higher as the ongoing asymmetry in CHF price action is likely to be exposed in the coming months should the French elections pass without any adverse market reaction.
"Our analysis and expectations for EUR/CHF upside is based on more than simply the assumption that CHF will weaken on afavorable French election outcome….EUR/CHF is becoming more positively correlated to the improvement in the Euro Area economy. At the same time, the rolling beta of European peripheral spreads, which is our proxy for regional political concerns, has remained broadly stable," BofAML argues.
BofAML targets EUR/CHF at 1.10, 1.11, and 1.12 by the end of Q2, Q3, and Q4 respectively.
EUR/CHF is trading circa 1.0714 as of writing.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
