JPM Stress Downside Risks to Their 0.93 EUR/CHF Forecast

JP Morgan write on SNB / CHF:

• They remain long CHF versus JPY, GBP, SEK and lower EUR/CHF forecasts from 0.95 to 0.94 in Q3 and from 0.94 to 0.93 in Q4.
• They write that it’s harder for CHF to participate in the carry trade amidst Eurozone growth downgrades and continued SNB intervention, and CHF appears to be one of the few assets pricing the European slowdown more accurately.
• On sight deposits data, they write that while data is somewhat distorted by financial stability related events during Q1 in the Swiss banking sector, it still reflects continued CHF buying intervention. With inflation below 2% this raises the risk of less intense intervention by SNB, but JPM think it’s too soon for the SNB to send what would be a strong policy signal in the form of materially reduced purchases.
• They think continued SNB intervention and Eurozone growth downgrades can push CHF stronger from here and stress downside risks to our EUR/CHF forecast of 0.93 by year end.