EUR/CHF: one to watch with upcoming elections in EZ - Raboabank

Analysts at Rabobank noted that EUR/CHF has lurched lower in recent trading session, declining almost 1% since January 26th.  

Key Quotes:

"The better tone of the CHF vs. the EUR is despite the fact that the EUR was emboldened at the start of the week by the releases of stronger than expected German inflation data."

"The lead up to the French Presidential election continues to defy forecasts. The socialist primaries have produced the latest shock by handing victory to Hamon."

"The republican primaries had already produced their own surprise candidate in Fillon. The republican candidate has been widely forecast to stand against Le Pen in the second round in May.  Fillon, however, is now embroiled in a judicial inquiry regarding the provision of public money for his wife. "

This scandal could conceivably strengthen the hand of the anti-establishment Le Pen. While a loss for Le Pen could produce a relief rally for the EUR, equally the CHF could be emboldened vs. the EUR in the run up to this election." 

"Given demand for safe haven we do not expect EUR/CHF to return to the 1.08 level until after the French election – assuming Le Pen loses in May."  

The combination of US and French politics will likely dictate the extent of safe haven flow in the coming months. Yesterday’s low near 1.0637 is likely to provide some support ahead of the June low near 1.0623."