EUR/CHF downside risk remains in place – ING

Analysts at ING note that the euro has proven to be quite resilient to the latest developments in Italy and is likely due to markets still attaching a relatively high probability that a new majority will be found and snap elections will be averted for now.

Key Quotes

“If these expectations prove wrong, new elections would likely have the potential of adding pressure to the euro outlook, already clouded given the ECB ultra-dovish stance.”

“New elections have the potential of adding pressure to the euro outlook, already clouded given the ECB ultra-dovish stance.”

“We suspect that any euro downside will likely be mirrored in a weaker EUR/CHF rather than EUR/USD. Indeed, the franc has been historically well correlated to movements in BTP rates and may also benefit from a further escalation in global trade tensions as well as ECB easing. Our 3Q19 forecast for EUR/CHF is 1.07.”