UBS Switzerland AG has revised its near-term forecast for the euro against the Swiss franc, reducing its June projection to 0.91. The bank's strategists pointed to ongoing tensions between the United States and Iran, elevated oil prices and a rise in investor risk aversion as the primary pressures weighing on the currency pair.
According to UBS, the euro has come under downward pressure in recent weeks as geopolitical risk tied to the US-Iran situation intensified, and as energy costs climbed. Europe’s role as a net energy importer increases its exposure to sustained high energy prices, while the Swiss franc is drawing demand as a perceived safe-haven currency.
In a note published on Friday, UBS strategists Constantin Bolz and Clémence Dumoncel said they expect the Swiss National Bank - the SNB - to act to prevent any sharp appreciation of the franc, a dynamic that should limit strong moves below the 0.90 mark. The bank describes 0.90 as an important technical and psychological barrier for both markets and the SNB.
UBS set out an alternative, risk-off pathway in which the Iran conflict persists and pushes the euro-dollar rate toward 1.10. Under that scenario, the strategists warn EUR/CHF could breach 0.90 and potentially approach 0.88. The revised 0.91 forecast for June, UBS says, reflects a recalibrated near-term risk environment and incorporates the possibility of continued disruptions to energy supplies.
The bank's base case assumes the Iran-related conflict will be short-lived and that oil flows through the Strait of Hormuz will not suffer extended interruption. If those conditions hold, UBS expects oil prices to ease by June and for upward pressure on the franc to diminish. In that setting, markets would refocus on longer-term drivers such as fiscal stimulus in Europe - with particular emphasis on Germany - which UBS sees as supportive for economic growth expectations.
Looking beyond the immediate horizon, UBS maintains an unchanged EUR/CHF forecast of 0.93 for September, December and March 2027. The analysis underpinning that medium-term view points to steady European growth, a favorable carry profile for the euro and the prospect of targeted SNB interventions as factors that argue against sustained franc strength beyond the near term.
UBS also identified technical upside resistance levels for EUR/CHF around 0.915, 0.9275 and 0.935. Factoring in carry, the bank judges the euro to offer a superior total return outlook over a one-year horizon relative to the Swiss franc.
Key downside risks to UBS’s outlook include further deterioration in global geopolitics or renewed strains in energy markets. Conversely, the strategists note that a truce in the Middle East or Ukraine could prompt a quicker rebound in EUR/CHF, potentially pushing the pair back above 0.93.
Market context:
- Geopolitical tensions and higher oil prices have placed downward pressure on EUR/CHF.
- Europe's energy import dependency is amplifying sensitivity to energy price shocks.
- The Swiss franc is benefiting from safe-haven flows as investors seek lower-risk assets.