Chris Turner at ING notes that EUR/CHF is in a consolidation phase following a pronounced drop just over a week earlier. He explains that the earlier move lower was triggered by mounting worries over French debt, which were significant enough to reduce expectations for further tightening by the European Central Bank. Turner points out that it is uncertain whether short-dated euro rates need to decline much further from current levels, unless there is a marked fall in energy prices. He observes that market pricing currently reflects 22bp of rate hikes in December – while ING itself expects a 25bp move – followed by an additional 30-40bp of tightening heading into next year.
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