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Investing.com - UBS has reduced its EUR/CHF fair value estimate to 1.05 from 1.06, reflecting the widening inflation gap between Switzerland and Europe, according to a report released Wednesday.
The Swiss banking giant noted that Swiss inflation has continued to slow significantly compared to European inflation, creating downward pressure on the currency pair’s purchasing power parity (PPP). UBS analysts expect this trend to accelerate in the coming months.
Despite the current fair value remaining above EUR/CHF spot rates, UBS emphasized that the direction of the trend is more significant than the absolute level. The bank projects EUR/CHF will likely reach new lows in 2025.
The report highlighted a similar pattern occurred in 2021-2022 when the inflation differential between Switzerland and Europe was particularly pronounced, resulting in a rapid decline in EUR/CHF PPP during that period.
UBS also provided fair value estimates for other euro crosses, placing EUR/GBP at 0.90, EUR/SEK at 10.59, and EUR/NOK at 10.47 in its latest currency analysis.
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