EUR/USD not ready for primetime, EUR/CHF has likely bottomed – TDS

The European Central Bank (ECB) reinforced its message that net bond purchases are set to end in Q3, and the first rate hike will take place some time after that. Despite the ECB's foot dragging today, economists at TD Securities like EUR/CHF upside in the months ahead while EURUSD is set to maintain the 1.08-1.12 range, which should hold through early Q2.

ECB confirmed it remains on course to end net asset purchases in Q3

“The ECB left its messaging virtually unchanged from March, committing to end the APP sometime in Q3 and hike rates ‘some time after’. We now expect lift-off in September, with sequential quarterly hikes through to the end of next year.”

“EUR/USD is likely to maintain the 1.08 to 1.12 range, with lingering downside risks to the lower-end.”

“We see a lot of upside in EUR/CHF and EUR/GBP, though the latter might require a bit more time (we prefer buying near 0.83). As the ECB container ship turns, EURCHF upside looks quite attractive, especially as CHF is the most expensive currency on our dashboard.”

“We note that inflationary pressures are much higher in EUR relative to CHF, suggesting the need for currency strength to manage them. A diversification of global equity flows would also benefit EUR over CHF, reflecting longer-term valuations between the pair.”