UBS lowers EURCHF June forecast to 0.91 amid Middle East tensions

Investing.com -- UBS Switzerland AG has revised its June forecast for the euro-Swiss franc exchange rate to 0.91, down from a previous projection, citing ongoing US-Iran tensions and elevated oil prices as key factors pressuring the currency pair.

The EURCHF exchange rate has faced downward pressure in recent weeks due to escalating geopolitical tensions between the United States and Iran, higher oil prices, and increased risk aversion among investors.

Europe’s status as a net energy importer has heightened the region’s vulnerability to persistently high energy prices, while the Swiss franc has attracted safe-haven demand.

In a note published on Friday, UBS strategists Constantin Bolz and Clémence Dumoncel expect the Swiss National Bank to prevent sharp appreciation of the franc, which should limit exchange rate movements below the 0.90 level.

The bank views the 0.90 threshold as an important technical and psychological level for markets and the SNB.

In a risk-off scenario where the Iran conflict persists and pushes the euro-dollar exchange rate toward 1.10, EURCHF could fall below 0.90, potentially approaching 0.88, according to the analysis. The revised June forecast of 0.91 reflects a more balanced near-term risk backdrop and accounts for the possibility of ongoing energy supply disruptions.

UBS’s base case scenario assumes the Iran conflict will be short-lived and that oil flows through the Strait of Hormuz will not face prolonged disruption.

Under these conditions, oil prices should ease by June, reducing upward pressure on the Swiss franc. The bank expects markets to then refocus on longer-term drivers, including fiscal stimulus in Europe, particularly in Germany, which should support economic growth expectations.

For the medium term, UBS maintains its EURCHF forecast of 0.93 for September, December, and March 2027.

The bank’s analysis suggests that steady European growth, a favorable carry profile, and potential SNB interventions argue against sustained franc strength beyond the near-term period.

The investment bank identifies upside resistance levels around 0.915, 0.9275, and 0.935 for the currency pair. Including carry, UBS believes the euro offers a better total return outlook over a one-year horizon compared to the Swiss franc.

Key risks to the forecast include further deterioration in global geopolitics or renewed strains in energy markets. Conversely, a truce in the Middle East or Ukraine could lead to a quicker rebound in EURCHF, potentially pushing the pair above 0.93.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.