EUR/CHF May Retest 0.96 as Swiss Franc Lags on Low Yield

UBS analysts believe that the EUR/CHF exchange rate may retest the level of 0.96 in the near future due to the Swiss franc's low yield relative to other currencies.

The bank notes that rising energy prices and expectations of further monetary tightening by major central banks have widened yield differentials, pushing the EUR/CHF above 0.94.

Despite this, UBS expects little change in the September Swiss National Bank meeting and does not anticipate a rate hike.

The bank believes that markets have become overly hawkish on rates and that the CHF continues to face pressure due to its low yield.

In the short term, UBS expects EUR/CHF to move higher, but in the medium term, it anticipates the cross to trend lower as the SNB eventually starts tightening and rate differentials narrow.