UBS lowers June forecast for EUR/CHF to 0.91 amid Middle East tensions

Investing.com - UBS Group AG has lowered its June forecast for the EUR/CHF exchange rate to 0.91, down from previous expectations, citing ongoing US-Iran tensions and high oil prices as key factors putting pressure on the currency pair.

In recent weeks, the EUR/CHF exchange rate has faced downward pressure due to escalating geopolitical tensions between the US and Iran, rising oil prices, and increased risk aversion among investors.

Europe’s status as a net energy importer makes the region more vulnerable to sustained high energy prices, while the Swiss franc has attracted safe-haven demand.

In a report released on Friday, UBS strategists Constantin Boltz and Clément Dumontier forecast that the Swiss National Bank will prevent a sharp appreciation of the franc, which should limit the exchange rate from falling below 0.90.

The bank considers the 0.90 level an important technical and psychological threshold for both the market and the Swiss National Bank.

According to analysis, in a risk-averse scenario, if the Iran conflict persists and pushes the EUR/USD exchange rate toward 1.10, the EUR/CHF could break below 0.90, possibly approaching 0.88. The lowered June forecast of 0.91 reflects a more balanced near-term risk outlook, considering the potential for continued disruptions in energy supply.

UBS’s baseline scenario assumes the Iran conflict will be short-lived and that oil flows through the Strait of Hormuz will not face long-term interruptions.

Under these conditions, oil prices are expected to decline by June, easing upward pressure on the franc. The bank anticipates that markets will then refocus on long-term drivers, including fiscal stimulus measures in Europe (especially Germany), which should support economic growth expectations.

In the medium term, UBS maintains its EUR/CHF forecasts of 0.93 for September, December 2027, and March 2028.

The bank’s analysis indicates that stable European growth, favorable interest rate differentials, and potential Swiss National Bank interventions do not support a sustained strengthening of the franc after the near term.

UBS identifies resistance levels around 0.915, 0.9275, and 0.935 for the currency pair. The bank believes that, including interest rate differentials, the euro’s total return prospects over the next year are better than those of the franc.

Main risks to the forecast include further deterioration of global geopolitical tensions or renewed stress in energy markets. Conversely, a ceasefire in the Middle East or Ukraine could lead to a quicker rebound of the EUR/CHF, potentially pushing the pair above 0.93.

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