The Helvetic currency has lost two figures since the start of the week going from 1.16CHF to 1.14CHF. Some Swiss economic indicators came in better. The UBS Consumption indicator has risen in August from 1.38 to 1.53. This morning the KOF Leading Indicator, an indicator trying to predict the future of the Swiss economy, has also risen.
Economic indicators are showing good optimism on the Swiss economy and markets tends to also adjust their optimism on the single currency which explains, in our view, the current decline in the EURCHF.
The EURCHF is also largely driven in the short-term on European political issues. The Catalonian vote is definitely a thorn in the side of the European Union which tend to be above nations. We believe that the right for self-determination will become a key issue in the Future of the European Union and as a result will continue weighing on the single currency. On top of that, we also consider that markets are still overly optimistic regarding the future tightening of the ECB.
In the short-term, we should nonetheless see the euro rising against the CHF as there are decent likelihood that Madrid invalidates the Catalonian vote.