Morgan Stanley went long EUR/CHF at......>

EURO-SWISS: Morgan Stanley went long EUR/CHF at the NY close on Thursday with a

target of CHF1.1650 and a stop at CHF1.1180.

- MS expect "the Italian budget deficit to come in smaller than assumed by

markets, which should allow for a relief rally in BTPs and EUR/CHF. The

tightening in BTP-Bund spread should reduce the risk premium for EUR assets and

incentivize equity inflows, which have recently been largely FX-unhedged and

should thus strengthen the EUR. The SNB has stayed dovish and clearly focused on

the exchange rate, with SNB President Jordan calling for an "expansionary

monetary policy" in response to CHF appreciation. This supports our argument

that the SNB is unlikely to hike rates anytime soon and before the ECB, which

should allow EUR/CHF to move higher on the back of rate differentials. We also

expect a temporary stabilization in EM, which should allow EUR/CHF to move

higher. Risks to this trade include an increase in euro area political

uncertainty or SNB communication signaling tighter policy."