A ‘perfect storm’ for weaker CHF but cautious EUR/CHF can extend through 1.15 – BAML

Bank of American Merrill Lynch on the Swiss franc

Bank of America Merrill Lynch Research discusses CHF outlook and maintains a bearish bias in the medium-term. 

In many ways April provides the roadmap on how we think CHF will evolve over the coming months if global (and particularly Eurozone) growth stabilises and should regional geo-political concerns (such as Brexit) fade as we expect that they will.

We therefore remain bearish on CHF over the medium-term due to its persistent overvaluation, the trend deterioration in Switzerland’s basic balance of payments (the current account surplus continues to be neutralised by sizeable net portfolio and FDI outflows) and the SNB’s commitment for a weaker CHF,” BofAML notes. 

However, we are cautious that the current move can meaningfully extend through key resistance at 1.15. Whilst the market backdrop remains supportive for further EUR/CHF gains: volatility compression; the rally in European bank stocks, carry-to-vol; and stable BTP-Bund spreads, the move has taken place against a backdrop of a void in Brexit news flow. In addition, with European Parliamentary elections scheduled in a months’ time,” BofAML adds.

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Forex – Pound Slips as U.K Lawmakers Reject Amendment to Extend Brexit Deadline

© Reuters.  © Reuters.

Investing.com – U.K. lawmakers on Tuesday rejected an amendment to extend the deadline for Britain to leave the European Union.

Labour MP Yvette Cooper’s amendment, which sought to extend Article 50 if MPs fail to approve the Withdrawal Agreement by Feb. 26, was voted down. Without an option to extend the deadline beyond March 29, there’s a risk the U.K. crashes out of the EU without deal.

fell 0.50% to $ 1.3096.

“The Brady Amendment,” which was tabled by a senior Conservative lawmaker Graham Brady and aimed to renegotiate the Irish backstop, won the backing of U.K lawmakers by a slender margin of 16 votes. The Irish backstop seeks to avoid a hard border between Northern Ireland and the Republic of Ireland.

In a show of force against a no-deal Brexit, MPs voted in support of the Spelman ‘no-deal Amendment’, with 318 votes to 310, a margin of 8. The amendment is advisory and has no legislative force.

The series of amendments to the Withdrawal Deal focused on resolving the Irish backstop issue and ensuring Britain does not leave the EU without a deal.

Prime Minister Theresa May will head to Brussels and seek to persuade EU lawmakers to consider amendments to the Withdrawal Deal. The EU, however, has been reluctant to reopen the withdrawal deal, which suffered one of the biggest defeats in U.K. parliamentary history on Jan. 15.

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