swiss franc

Bank of Japan opens the door to ending negative rates, but timing uncertainty remains

The Bank of Japan stood pat on monetary policy today as widely expected. But the market is now paying attention to a more positive tone on the wage and inflation outlook, as well as an upgrade to the FY2024 inflation outlook which lays the groundwork for policy normalisation. We still see a slightly higher chance of a first hike taking place in June than in April.

 

No surprise that the BoJ kept its policy rate and 10-year yield target unchanged

We think the Bank of Japan's modest change in its view on inflation hints that policy normalisation is approaching. The BoJ assessed its statement that the likelihood of achieving the price goal has “continued to gradually rise.” Governor Kazuo Ueda’s comments on wages and inflation were also more positive than in previous meetings, signalling that a path to policy normalisation could be underway. Markets were likely pleased to hear that the

COT Currency Speculator Sentiment rising for Euro & British Pound Sterling

COT Currency Speculator Sentiment rising for Euro & British Pound Sterling

Invest Macro Invest Macro 24.01.2022 11:36
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday January 18th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the trend changes in speculator sentiment we are seeing in the Euro and the British pound sterling. Speculators have been boosting their bets for the Euro and pound sterling over the past weeks and have now pushed their bets in both currencies to their best levels since September. Euro positions have gained for five consecutive weeks (a 5-week total rise of +36,463 contracts) and have now been in bullish territory for two straight weeks after spending thirteen out of the past fourteen weeks in bearish territory. This week’s net position of +24,584 contracts marks the best position since September 14th when positions were in a downtrend and on their way into negative territory. British pound speculator bets, meanwhile, have risen sharply with four straight weeks of gains (a 4-week rise by +57,439 contracts) and have now settled into a current position of just -247 net contracts. The net position had been at a multi-year bearish high of -57,686 contracts as recently as December 21st before a turnaround in sentiment. Free Reports: Top 5 Companies Added to Our Stock Watch List this Quarter - Here are the Stock Symbols that stood out so far in the fourth quarter of 2021. Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis. Joining the Euro (18,579 contracts) and British pound sterling (28,919 contracts) with positive changes this week were the yen (6,646 contracts), New Zealand dollar (273 contracts), Canadian dollar (14,868 contracts), Australian dollar (3,032 contracts) and the Mexican peso (9,371 contracts). The currencies with declining bets were the US Dollar Index (-1,458 contracts), Brazil real (-557 contracts), Swiss franc (-3,150 contracts), Russian ruble (-3,195 contracts) and Bitcoin (-172 contracts) Data Snapshot of Forex Market Traders | Columns Legend Jan-18-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index EUR 691,882 80 24,584 43 -50,464 61 25,880 17 JPY 201,820 56 -80,879 17 99,740 86 -18,861 9 GBP 183,234 28 -247 74 2,848 31 -2,601 50 AUD 181,136 68 -88,454 3 98,519 92 -10,065 28 MXN 151,778 27 4,920 29 -7,490 70 2,570 54 CAD 143,371 26 7,492 58 -13,723 47 6,231 42 USD Index 53,283 74 36,434 89 -42,397 4 5,963 82 RUB 45,413 46 6,422 29 -7,251 69 829 57 NZD 44,727 33 -8,331 57 10,622 47 -2,291 26 CHF 39,871 14 -10,810 51 13,799 46 -2,989 54 BRL 32,098 30 -11,369 53 10,759 48 610 74 Bitcoin 11,468 62 -549 91 -22 0 571 26   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 36,434 contracts in the data reported through Tuesday. This was a weekly lowering of -1,458 contracts from the previous week which had a total of 37,892 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.6 percent. The commercials are Bearish-Extreme with a score of 4.1 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 81.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.5 3.2 15.4 – Percent of Open Interest Shorts: 11.1 82.7 4.2 – Net Position: 36,434 -42,397 5,963 – Gross Longs: 42,369 1,684 8,180 – Gross Shorts: 5,935 44,081 2,217 – Long to Short Ratio: 7.1 to 1 0.0 to 1 3.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 88.6 4.1 81.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 2.7 -3.6 6.8   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of 24,584 contracts in the data reported through Tuesday. This was a weekly gain of 18,579 contracts from the previous week which had a total of 6,005 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 42.5 percent. The commercials are Bullish with a score of 61.5 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.3 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.6 56.3 11.5 – Percent of Open Interest Shorts: 27.1 63.6 7.8 – Net Position: 24,584 -50,464 25,880 – Gross Longs: 211,901 389,617 79,656 – Gross Shorts: 187,317 440,081 53,776 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 42.5 61.5 17.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 10.1 -8.6 -4.3   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of -247 contracts in the data reported through Tuesday. This was a weekly gain of 28,919 contracts from the previous week which had a total of -29,166 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 73.8 percent. The commercials are Bearish with a score of 31.4 percent and the small traders (not shown in chart) are Bullish with a score of 50.3 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 21.7 62.5 14.3 – Percent of Open Interest Shorts: 21.8 60.9 15.8 – Net Position: -247 2,848 -2,601 – Gross Longs: 39,760 114,486 26,267 – Gross Shorts: 40,007 111,638 28,868 – Long to Short Ratio: 1.0 to 1 1.0 to 1 0.9 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 73.8 31.4 50.3 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 27.4 -30.6 28.5   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -80,879 contracts in the data reported through Tuesday. This was a weekly boost of 6,646 contracts from the previous week which had a total of -87,525 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.9 percent. The commercials are Bullish-Extreme with a score of 85.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 4.0 86.1 8.7 – Percent of Open Interest Shorts: 44.0 36.6 18.0 – Net Position: -80,879 99,740 -18,861 – Gross Longs: 8,002 173,701 17,475 – Gross Shorts: 88,881 73,961 36,336 – Long to Short Ratio: 0.1 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 16.9 85.7 9.0 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -11.3 9.5 -3.1   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -10,810 contracts in the data reported through Tuesday. This was a weekly reduction of -3,150 contracts from the previous week which had a total of -7,660 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.1 percent. The commercials are Bearish with a score of 46.4 percent and the small traders (not shown in chart) are Bullish with a score of 54.5 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 2.3 67.3 30.0 – Percent of Open Interest Shorts: 29.4 32.7 37.5 – Net Position: -10,810 13,799 -2,989 – Gross Longs: 925 26,828 11,951 – Gross Shorts: 11,735 13,029 14,940 – Long to Short Ratio: 0.1 to 1 2.1 to 1 0.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 51.1 46.4 54.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 2.2 -7.4 15.5   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of 7,492 contracts in the data reported through Tuesday. This was a weekly advance of 14,868 contracts from the previous week which had a total of -7,376 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.9 percent. The commercials are Bearish with a score of 46.9 percent and the small traders (not shown in chart) are Bearish with a score of 42.2 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 34.7 41.1 21.8 – Percent of Open Interest Shorts: 29.5 50.7 17.5 – Net Position: 7,492 -13,723 6,231 – Gross Longs: 49,792 58,921 31,270 – Gross Shorts: 42,300 72,644 25,039 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.2 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 57.9 46.9 42.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 15.3 -13.5 6.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -88,454 contracts in the data reported through Tuesday. This was a weekly increase of 3,032 contracts from the previous week which had a total of -91,486 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.8 percent. The commercials are Bullish-Extreme with a score of 92.4 percent and the small traders (not shown in chart) are Bearish with a score of 27.9 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.0 82.2 10.5 – Percent of Open Interest Shorts: 53.8 27.9 16.1 – Net Position: -88,454 98,519 -10,065 – Gross Longs: 9,051 148,978 19,008 – Gross Shorts: 97,505 50,459 29,073 – Long to Short Ratio: 0.1 to 1 3.0 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 2.8 92.4 27.9 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -6.2 -0.3 17.1   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of -8,331 contracts in the data reported through Tuesday. This was a weekly advance of 273 contracts from the previous week which had a total of -8,604 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.3 percent. The commercials are Bearish with a score of 46.8 percent and the small traders (not shown in chart) are Bearish with a score of 25.6 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.0 66.8 6.4 – Percent of Open Interest Shorts: 44.6 43.0 11.5 – Net Position: -8,331 10,622 -2,291 – Gross Longs: 11,612 29,876 2,851 – Gross Shorts: 19,943 19,254 5,142 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 57.3 46.8 25.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -31.9 30.0 -5.2   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of 4,920 contracts in the data reported through Tuesday. This was a weekly increase of 9,371 contracts from the previous week which had a total of -4,451 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.4 percent. The commercials are Bullish with a score of 69.7 percent and the small traders (not shown in chart) are Bullish with a score of 53.9 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 49.7 46.1 3.9 – Percent of Open Interest Shorts: 46.5 51.0 2.2 – Net Position: 4,920 -7,490 2,570 – Gross Longs: 75,461 69,942 5,901 – Gross Shorts: 70,541 77,432 3,331 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 29.4 69.7 53.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 29.4 -30.3 15.6   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of -11,369 contracts in the data reported through Tuesday. This was a weekly fall of -557 contracts from the previous week which had a total of -10,812 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.4 percent. The commercials are Bearish with a score of 47.8 percent and the small traders (not shown in chart) are Bullish with a score of 74.2 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 34.1 56.6 8.9 – Percent of Open Interest Shorts: 69.6 23.1 7.0 – Net Position: -11,369 10,759 610 – Gross Longs: 10,958 18,179 2,841 – Gross Shorts: 22,327 7,420 2,231 – Long to Short Ratio: 0.5 to 1 2.5 to 1 1.3 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 53.4 47.8 74.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -7.7 6.6 9.9   Russian Ruble Futures: The Russian Ruble large speculator standing this week was a net position of 6,422 contracts in the data reported through Tuesday. This was a weekly decrease of -3,195 contracts from the previous week which had a total of 9,617 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.6 percent. The commercials are Bullish with a score of 68.9 percent and the small traders (not shown in chart) are Bullish with a score of 57.1 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 35.3 60.0 4.6 – Percent of Open Interest Shorts: 21.2 75.9 2.8 – Net Position: 6,422 -7,251 829 – Gross Longs: 16,034 27,233 2,101 – Gross Shorts: 9,612 34,484 1,272 – Long to Short Ratio: 1.7 to 1 0.8 to 1 1.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 28.6 68.9 57.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -17.5 19.1 -25.4   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of -549 contracts in the data reported through Tuesday. This was a weekly decline of -172 contracts from the previous week which had a total of -377 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.9 percent. The commercials are Bearish with a score of 28.5 percent and the small traders (not shown in chart) are Bearish with a score of 25.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 73.4 3.1 12.3 – Percent of Open Interest Shorts: 78.2 3.3 7.3 – Net Position: -549 -22 571 – Gross Longs: 8,417 355 1,407 – Gross Shorts: 8,966 377 836 – Long to Short Ratio: 0.9 to 1 0.9 to 1 1.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 90.9 28.5 25.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 8.4 -13.2 -5.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here. CountingPips Forex Blog Forex and Currency News Opinions   COT Bonds Speculators sharply reduce 5-Year Treasury bearish bets for 2nd week →
Intraday Market Analysis – CHF Bounces Back

Intraday Market Analysis – CHF Bounces Back

Jing Ren Jing Ren 12.04.2022 07:57
USDCHF hits resistance The Swiss franc rallies across the board as traders dump risk assets for safe haven ones amid uncertainty. The latest rebound came to a halt at 0.9370 from the late March sell-off. The RSI’s double top in the overbought zone prompted intraday buyers to take profit, weakening the upward momentum. A bullish close would lift offers to the recent peak at 0.9460, where strong selling pressure could be expected. A breakout may extend the rally to 0.9600. Otherwise, 0.9240 is the closest support to test the bulls’ resolve. EURGBP attempts rebound The sterling softened after Britain’s GDP fell short of expectations in February. The euro found support in the demand zone between 0.8300 and 0.8310, an important level from the daily chart. The ensuing break above 0.8360 flushed out some selling interests and could pave the way for a sustained bounce. 0.8400 is the next hurdle and its breach may propel the single currency to the previous high (0.8510). An overbought RSI may cause a temporary pullback and the bulls may see it as an opportunity to join in. US 30 struggles for support The Dow Jones 30 turns south as US Treasury yields continue to climb. The index briefly found support over the 30-day moving average (34200). A bullish RSI divergence indicates a deceleration in the current sell-off. Nonetheless, the bulls’ struggle to push past 35000 suggests that short-term sentiment remains cautious. On the downside, a fall below 34200 could trigger a broader liquidation, causing an extended consolidation in the days to come. 33500 at the origin of the previous breakout would be the next support.
Steel majors invest in green steel, but change might be driven by contenders

EUR Falls To US Dollar (EUR/USD), Pound Sterling Due To Weaken As UK Recession Looms (EUR/GBP), Market Awaits Fed Meeting Minutes (USD/CHF, GBP/USD)

Rebecca Duthie Rebecca Duthie 25.05.2022 18:27
Summary: EU PPI inflation data caused the Euro to weaken on Wednesday. Investor sentiment looks poor towards the GBP going into summer. Pound Sterling recovers against the US Dollar. Read next: Hawkish ECB Bodes Well For The Euro, UK PMI Data Disappoints (EUR/GBP), Hawkish SNB Offers Swiss Franc Still Support (USD/CHF), AUD/JPY - Good Morning Forex!  A rise in PPI inflation data causes Euro weaken Market sentiment is reflecting mixed signals for this currency pair. Looking at the value of the Euro in terms of PPI and CPI data: the rise in PPI inflation in the euro area reduced the Euros fair value estimate, whereas the European CPI inflation data remains close to that of the US CPI inflation. Therefore, it is the release of PPI inflation data that has caused the Euro to lose more than 0.6% to the US Dollar on Wednesday. EUR/USD Price Chart GBP weakens as concerns of a recession looms The market is reflecting mixed market sentiment for this currency pair. Investors expect the Pound Sterling to have a tough summer period. The slowing UK economy and disappointing PMI data are both aspects that will likely cause the GBP to weaken not only against the Euro but against other currencies too. The market is defaulting to buying Euros and selling Great British Pounds in the wake of changing European Central Bank (ECB) policy. EUR/GBP Price Chart Swiss Franc The market sentiment for this currency pair is reflecting mixed market signals. During the trading week last week, the US Dollar weakened against the Swiss Franc due to the hawkish attitude shown by the Swiss National Bank (SNB) and investors desire for safe-haven assets. This sentiment has continued into the current trading week. USD/CHF Price Chart GBP recovers against the USD The GBP strengthened against the US Dollar on Wednesday as the market awaited the Federal Reserve’s latest meeting minutes. Investors are eager to see how aggressively the Fed will raise interest rates going forward in an attempt to tackle rising inflation. Investor sentiment is negative toward the US Dollar at the moment, which has given some currencies, such as the GBP, an opportunity to recover. The market sentiment for this currency pair is reflecting bullish signals. GBP/USD Price Chart Read next: ECB Offering The Euro Support (EUR/USD), Strengthening Of The Renminbi Supporting The EUR and GBP, SNB Turns Hawkish (EUR/CHF) - Good Morning Forex!  Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen

ECB Interest Rate Announcement Due Tomorrow Offers Euro Support (EUR/USD, EUR/GBP), JPY Facing Negative Outlook (USD/JPY), Potential For A Hawkish SNB Offers CHF Support (USD/CHF)

Rebecca Duthie Rebecca Duthie 08.06.2022 16:22
Summary: Markets are becoming more optimistic around hopes of a more hawkish European Central Bank (ECB). Firmer oil prices adding to downward pressure on JPY. Strong market expectations of a more hawkish Swiss National Bank (SNB). Read next: DOW 30 Turbulent In The Wake Of Targets (TGT) Profit Warning, Japanese Yen Suffering From BoJ Monetary Easing  Euro holds steady The market is reflecting mixed signals for this currency pair. The markets are becoming more optimistic around hopes of a more hawkish European Central Bank (ECB) tomorrow after adding a couple more basis points to the yearly forecasts. There has been talk of a 50bps hike in July and rumors of a possible hike on Thursday, it is likely that the market could see a change in ECB tone which has allowed the Euro to remain resilient against the US Dollar. On Wednesday, the market opened with strong economic Q1 data for the eurozone. The euro did not react instantly to the release of this data, likely due to its delay. EUR/USD Price Chart Anticipation of ECBs announcement offers Euro support The market is reflecting mixed signals for this currency pair. The Euro has gained against the pound sterling ahead of the market awaiting the European Central Banks (ECB) interest rate announcement, which is due tomorrow. Earlier in the trading week the pound sterling rallied in response to the news of Boris Johnssons vote of no confidence. If the ECB announces an interest rate hike in July, the pound sterling currency could be under pressure against the Euro. EUR/GBP Price Chart Negative outlook for Japanese Yen is likely to continue The market is reflecting bullish signals for this currency pair. In addition to the Bank of Japan (BoJ) continuing its monetary easing, firmer oil prices have added to the downward pressure on the Japanese Yen and both of these factors will continue to add to the negative outlook for the safe-haven currency. USD/JPY Price Chart CHF holding its position in the market The market is reflecting bullish signals for this currency pair. The Swiss Franc has recovered against the US Dollar in comparison to the lows experienced in mid-May when the US Dollar was at its strongest, the recovery comes in the wake of market expectations of a more hawkish Swiss National Bank (SNB). the expectations come from indications from policy makers that the SNB will increase its interest rates for the first time since the 2008 financial crisis. USD/CHF Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
Credit Suisse case: Western Assets expects Swiss authorities to act if sentiment doesn't improve

Data Showed A Slowing Eurozone Economy (EUR/USD, EUR/CHF), UK PMI Data Came In Stronger Than Expected (EUR/GBP), NZD Was The Top Performing Currency On Thursday (GBP/NZD)

Rebecca Duthie Rebecca Duthie 23.06.2022 15:44
Summary: Eurozone data showed a slowing European economy for June. Pound sterling offered support from strong UK PMI data. NZD was Thursday's top performing currency. Read next: Fears Of Recession Loom (EUR/USD), UK CPI Inflation Data 9.1% For May (EUR/GBP), Surprisingly Strong Canadian Inflation Data (USD/CAD), EUR/JPY  Euro weakened in the wake of slowing economy data The market is reflecting mixed signals for this currency pair. The Euro fell sharply on Thursday in the wake of data that showed that the Eurozone economy had slowed during June and undermined the expectations for a series of rapid interest rate hikes from the European Central Bank (ECB) that are due to start in July. The fall in the Euro helped reinforce a bid for the US Dollar against all major pairs as investors continue to bet on a global economic slowdown. ` EUR/USD Price Chart UK PMI data beat market expectations The market is reflecting mixed market sentiment for this currency pair. The UK economy continued to grow during June as UK PMI data came in stronger than the market expected. At the same time UK wage pressures remained strong at firms that were increasingly willing to pass on price increases to customers, which is likely to continue to place pressure on the Bank of England (BoE) to raise interest rates. EUR/GBP Price Chart GBP/NZD upside risk The New Zealand Dollar was one of the top performing major currencies on Thursday when the NZD/USD pair seemed to be drawing dip-buyers from the market. The Pound to NZD has been contained over the past month, but with the NZD/USD pair testing major support levels, it is possible that the breakout risk for the GBP/NZD is on the upside. GBP/NZD Price Chart EUR/CHF The market is reflecting bearish signals for this currency pair. As the Swiss Franc continues to strengthen in the wake of the Swiss National Banks (SNB) interest rate hike, the Euro is weakening due to unfavourable economic data. EUR/CHF Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
FX: The SNB Is Getting Its Stronger Swiss Franc Via Gains Against The Dollar

Swiss National Bank Decided On Interest Rate. Let's Check EUR/CHF Reaction To The Hike And Comments

ING Economics ING Economics 22.09.2022 14:39
The Swiss National Bank raised interest rates by 75 basis points to 0.5% as planned, bringing the rate into positive territory for the first time since 2015. A reverse tiering system and a reduction in liquidity were also announced. EUR/CHF suffered a short squeeze on the news, but should come lower again 75bp increase As expected, the SNB has just announced an increase of 75bp in its key interest rate, bringing it to 0.5%. The rate in Switzerland is therefore back in positive territory for the first time since January 2015 and is no longer the lowest in the world. It is the end of an era. This rate hike is intended to combat inflation in Switzerland, which reached 3.5% in August, and is therefore higher than the SNB's objective of having inflation between 0 and 2%. Thanks to a more favourable energy mix, a lower share of energy in consumption, and the strength of the Swiss franc, which limits imported inflation, inflation in Switzerland is nevertheless still much lower than in neighbouring countries. The SNB believes that the risk of second-round effects is significant. The SNB now expects inflation to reach 3.0% in 2022, 2.4% in 2023 and 1.7% in 2024. Against this background, it says it "does not rule out further rate hikes in the coming months". Reverse tiering and liquidity reductions Interestingly, the SNB also took two other important decisions. First, it will introduce a two-tier system for the remuneration of sight deposits held by banks and other financial market participants. From now on, they will be remunerated at the SNB's key interest rate (0.5%) up to a threshold, and the part above this threshold will be remunerated at a rate of 0%. The threshold is currently set at 28 times the reserve requirement. It is therefore a reverse tiering system. The aim of this system is, according to the SNB, to encourage money market operations, even in a situation of excess liquidity. At first sight, this may seem surprising, as it could push money market rates to remain below the SNB rate. However, this system goes hand in hand with the desire to reduce liquidity in the market, which in practice should severely limit the proportion of holdings bearing 0% interest. To reduce liquidity, the SNB will conduct open market operations (repo and T-bills). According to the SNB, the aim of this is to ensure that money rates reach the SNB's key interest rate as quickly as possible. Further rate hikes to come in December Given the inflation forecasts, there is little doubt that the SNB will continue to raise rates in the future. Unlike other central banks, the SNB only meets quarterly, so the next meeting will be in December. By then, the European Central Bank and the Federal Reserve will probably have raised rates by another 75 basis points in October and November and will raise rates again in December. The SNB could follow suit, probably raising its rate by 75bp in December as well. This is likely to be the last rate hike and we do not expect anything more in 2023. Indeed, the deteriorating economic outlook and the expected decline in inflation in 2023 should be enough to leave the SNB comfortable with a rate of 1.25% for the year as a whole. EUR/CHF: Short squeeze should not last EUR/CHF rallied around 1.5% following the 75bp hike and comments from SNB Chairman Thomas Jordan that it would intervene against excessive moves. The squeeze probably owed to some positioning for a 100bp rate hike today, following the Swedish Riksbank's 100bp hike earlier in the week. Like the Riksbank, the SNB now only has one further rate meeting this year. However, we do not think this EUR/CHF rally will last. We think the SNB is happy to guide EUR/CHF lower as a means to keep its real exchange rate stable - given trading partner inflation is some 5% higher than in Switzerland. At the start of the year, few would have believed the SNB would be comfortable with EUR/CHF at today's level of 0.95/0.96. Equally, we think the case is growing for EUR/CHF to be trading 0.93 by the end of the year and conceivably 0.90 by next summer. Developments to the East only add to the case to hold the Swiss franc now.  Read this article on THINK TagsSwitzerland Swiss National Bank SNB CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The USD/CHF Pair Is Likely To Decline More

Switzerland: National Bank goes for a 50bps rate hike. Swiss inflation slowdown is impressing

Alex Kuptsikevich Alex Kuptsikevich 15.12.2022 13:18
The Swiss National Bank raised its rate by 50 points to 1.0% after two hikes of 50 and 75 points at the previous two meetings. In an accompanying commentary, the NBS said it was countering rising inflationary pressures. In the commentary, the central bank says that "further rate hikes are not ruled out". This is a milder formulation than other G10 central banks without Japan. However, the exact phrase was in the two previous decision comments, so we cannot speak of a softening tone in this case. At the recent and previous meetings, the step-up was the same as for our colleagues from the Fed and the ECB: now by 0.5 percentage points, in September by 0.75. However, remember that SNB meetings are twice as rare, so Swiss policy tightening is less drastic. For the year Swiss central bank raised the rate by 175 points against 250 points for the ECB (including the expected +50 today), 340 (also including the forthcoming decision) for the Bank of England and 425 for the Fed. Read next: Vietnamese Warehouse Equipment Maker Sues Amazon, Musk once again sold Tesla shares, Warner Bros. Discovery Inc Has Problems With High Costs| FXMAG.COM On the other hand, inflation is not as acute here, having retreated from a peak of 3.5% y/y to 3.0% in the last three months. The producer and import price index retreated to 3.8% y/y in November from 6.9% in June. Historically, Switzerland has comparatively lower inflation which is the reason for the lower key rate. Therefore, the current slower pace of monetary policy tightening is not likely to fundamentally undermine the Swiss franc. By playing up the divergence in the speed of rate hikes, the USDCHF could develop a rebound without encountering significant resistance to 0.9400, which looks like a very modest pullback after a more than 9% decline since November 3.
Traders assume interest rates in Japan and Switzerland could steadily go up next year

Traders assume interest rates in Japan and Switzerland could steadily go up next year

Conotoxia Comments Conotoxia Comments 19.12.2022 23:12
The U.S. Federal Reserve, the Bank of England, the Bank of Australia and New Zealand, as well as the European Central Bank and the Bank of Canada, are among others the central banks of the world's major economies that have already begun the cycle of interest rate hikes and are possibly to be close to completing it in the first or second quarter of 2023. In contrast, the situation seems to be different for the Bank of Japan and the Bank of Switzerland. We could see quite well how monetary policy could affect currency rates in 2022. The Fed, by starting aggressive monetary tightening, was able to make the U.S. dollar more attractive thanks to the higher interest rates its holders received. The Fed started the cycle, and the European Central Bank followed suit with some time lag. For the moment, this lag is estimated to be about six months. This could mean that the ECB will not complete its monetary tightening until two quarters later, after the Fed has done so. The effects of this shift could be observed in the EUR/USD exchange rate. Source: Conotoxia MT5, EURUSD, H4 The unprecedented pace of rate hikes in the U.S. may have helped the dollar until September, October, when discussions began about slowing the pace of USD interest rate increases. At that time, there was also discussion of what direction the European Central Bank should take, which for the moment is declaring hikes of 50 bps each and higher rates than the market had previously expected (>3%). What about the CHF and JPY? The above description may approximate the events in central banking in relation to the exchange rate where, if one theme ends (the near end of rate hikes in the US), the game begins for the next one (the later and higher end of the cycle in the Eurozone). According to data from the interest rate market, traders seem to assume that interest rates in Japan and Switzerland could go steadily upward in 2023. This, in turn, could mean that once the U.S. theme, then the eurozone, is over, the markets could move into the tightening game in countries with previously lowest interest rates in the world. Change in rhetoric in Japan, how does the yen exchange rate react? This morning, the Japanese yen strengthened 0.6% to 135.8 per USD after reports that Prime Minister Fumio Kishida plans to revise a 10-year agreement with the Bank of Japan, which says the central bank will reach a 2% inflation target "at the earliest possible time." The government is seeking to make the price target more flexible, which could broaden the BOJ's policy options for adjusting to economic developments. BNP Paribas Japan's chief credit strategist Mana Nakazora, a potential candidate for deputy governor of the Bank of Japan next year, also told Reuters recently that the central bank should revise its statement to give itself more room to adjust interest rates, according to tradingeconomics. The bottom line is that interest rate hike cycles seem to be staggered in different economies around the world. As a result, currency rates may also react accordingly with some time lag. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Japanese yen and Swiss franc - currencies of 2023? (conotoxia.com)
Canadian dollar becomes weaker in the wake of inflation print, consumer confidence supports greenback

Canadian dollar becomes weaker in the wake of inflation print, consumer confidence supports greenback

Jing Ren Jing Ren 22.12.2022 08:40
USDCAD hits resistance The Canadian dollar softened as November’s inflation reading showed signs of slowing down. On the daily chart, the uptrend remains intact and a bullish MA cross indicates solid support and a potential acceleration to the upside. However, the pair is still grinding the supply area around 1.3700 as the pressure builds up. A breakout would lead to a test of November’s peak at 1.3800, which would be a step closer to a bullish continuation. On the downside, 1.3530 next to the 30-day moving average is the first support. USDCHF tests critical floor The US dollar steadies as consumer confidence climbed to an eight-month high in December. Still, the pair has given up all the gains from its rally earlier this year, which shows a lack of commitment to keep the dollar rolling. The mood is still downbeat as the pair drifts lower and is capped by a series of lower highs, the latest being at 0.9370 right under the 20-day moving average. Last April’s low of 0.9210 has attracted some bargain hunters but its breach could trigger a new round of sell-off to 0.9100. USOIL grinds higher WTI crude edges higher over a larger-than-expected draw in US inventories. The commodity has so far found support at a 12-month low also the psychological handle of 70.00. Then a brief retracement saw follow-up bids over 73.50, suggesting solid interest from the buy side. A break above the recent high of 77.70 would open the path towards the daily resistance at 82.50 where renewed selling could be expected. Its breach, however, would put the oil price back on track. 75.80 is a fresh support in case of weakness. Read next: Netflix Wants You To Pay For Sharing Your Password With Others| FXMAG.COM
The USD/CHF Pair Is Likely To Decline More

US dollar has gained impressing 8% this year, but it didn't hurt Swiss franc very much as USD/CHF is only 1% higher

Kenny Fisher Kenny Fisher 30.12.2022 15:59
The Swiss franc is steady on Friday. In the European session, USD/CHF is almost trading at 0.9240, up 0.08%. On Thursday, USD/CHF dropped by 0.6% and hit a low of 0.9210, its lowest level since March 28th. KOF rebounds in December A quiet post-Christmas week wrapped up with the KOF Economic Barometer release today. After losing ground in the past two readings, the index rebounded in December and climbed to 92.2, up from 89.2 in November. This easily beat the estimate of 86.9 points. The main driver for the improvement was stronger manufacturing activity. Earlier this week, ZEW Economic Expectations also headed higher, rising from -57.5 to -42.8 points. The upturn is encouraging, but the indicator is still mired deeply in negative territory, as financial experts remain pessimistic about the Swiss economy’s outlook. As we turn the page to 2023, let’s take a quick look at the highlights of the Swiss franc’s performance over this past year. There have been plenty of ups and downs, but interestingly, USD/CHF is only about 100 points higher from where it was on January 1st. A US dollar rally in September and October saw USD/CHF break parity and hit 1.0148, its highest level since May. Since, then, the momentum has reversed, with the Swiss franc gaining an impressive 800 points since November 1st. Read next: Real bargains on Wall Street, Barron's point to, i.a. Google and Amazon as undervalued stocks | FXMAG.COM The US dollar has enjoyed a strong year, with the dollar index rising 8%, its best performance since 2015. The greenback has been boosted by a drop in risk appetite, but this didn’t hurt the Swiss franc, as both the dollar and the franc are Swiss haven currencies. In a major policy change, the Swiss central bank raised rates three times this year, which helped the Swiss franc keep pace with the US dollar even as the Fed aggressively raised rates. USD/CHF Technical USD/CHF is putting pressure on support at 0.9256. Below, there is support at 0.9159 There is resistance at 0.9377 and 0.9498   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Swiss franc touches 9-month high - MarketPulseMarketPulse
Ralph Shedler talks US dollar against Swiss franc - May 12th

Swiss franc (CHF) down, gold price fluctuates, crude oil gained

Jing Ren Jing Ren 12.01.2023 09:41
USDCHF claws back losses The Swiss franc plunged across the board after a pickup in risk sentiment. After a double top at 0.9400, a drop below 0.9260 had put the bulls in an awkward position. Last March’s lows around 0.9160 has attracted some bargain hunting. Then a close above 0.9270 revealed strong momentum, turning it into a support. Selling pressure could be expected at 0.9400 but a break above this major hurdle could trigger a recovery in the weeks to come. In the meantime, the RSI’s overbought situation may grant a limited pullback. XAUUSD to test key resistance Gold drifts sideways as traders reposition ahead of the US CPI. Following a brief fallback, a new high above 1860 indicates a strong bullish drive. The psychological level of 1900 sits with the start of a sell-off back in May and could act as a key obstacle ahead. The RSI’s repeatedly overbought condition on the daily chart may prompt short-term buyers to take profit, weakening the momentum. The resistance-turned-support at 1860 is the first level to expect follow-ups and 1833 on the 20-day moving average is a critical support. USOIL struggles for bids WTI crude jumped as the EU worked on more sanctions against Moscow. The price is consolidating above 70.00 as the bulls cling on the psychological level and 12-month low. The 70.00-81.10 range may be narrowing as traders probe levels back and forth. 74.30 is a fresh support to prevent the commodity from revisiting the critical floor right below. A close above the former support 78.30 may brighten up the mood and attract more buying interests. Only a rally above 81.00 would pave the way for a bullish reversal. Read next: The weaker pound has contributed to the UK100 trading at its highest since 2018 this week| FXMAG.COM
US core inflation hits 5.5% and it's the second lowest reading since November 2021

FX Daily: Biden’s budget serves as debt ceiling reminder

ING Economics ING Economics 09.03.2023 09:54
The dollar heads into Thursday's European session near recent highs, buoyed by hawkish Powell testimony and the resultant spike in short-dated US Treasury yields. Expect a quiet session ahead of tomorrow's February US jobs release. Of interest, however, may be the White House's new budget plan. This will serve as a reminder of US debt ceiling event risk Source: Shutterstock USD: Expect consolidation ahead of jobs data tomorrow The dollar is consolidating near recent highs and one can see why. Hawkish testimony this week from Fed Chair Jerome Powell has seen market pricing of the terminal Fed rate push up to 5.65% for a peak in September. US two-year Treasury yields are now 5.05% with the US 2-10 year curve inverted close to 110bp and prompting growing fears of a Fed-induced recession. In short, this is a far cry from the Fed disinflation/Rest of World recovery story that drove the dollar 10% weaker between November and January.  We cannot really look for a broad dollar decline until that disinflation story returns and acute US yield curve inversion breaks by the short end coming lower. This looks more like a story for the third quarter now. Before that, however, the market will take great interest in US activity and price data - hence the strong interest in tomorrow's US jobs number. More on that tomorrow. For today, the US focus may be on headlines emerging from the White House regarding the new budget. Reports suggest the Biden Administration will present a fiscally conservative budget plan to cut the deficit by US$3tn over 10 years, helped in part by tax increases on the wealthy - both income and capital gains tax increases are being touted. However, this budget has no chance of seeing the light of day given that Republicans control the House of Representatives. The budget does seek, however, to position the Democrats as fiscally conservative ahead of a challenging debate over raising the $31.4tn debt ceiling. We suspect this comes to a head in the July-August window when stop-gap funding measures are exhausted. The debt ceiling is certainly a live event risk for 3Q and probably one which is dollar negative - despite some touting a flight-to-safety dollar rally. Expect DXY to stay supported into the US nonfarm payrolls tomorrow. We doubt the dollar will turn substantially lower ahead of the 22 March FOMC meeting and indeed there is an outside risk that DXY could push up to 107.80 were US February activity and price data not to slow as much as expected. Chris Turner EUR: ECB division could prove costly The European Central Bank's hawkish turn since late last year has certainly provided support to the euro in the face of higher US rates. The ECB's trade-weighted euro is now up close to 5% from the lows seen in late August. Lower natural gas prices have certainly helped here, too. However, we were surprised to see comments from ECB dove, Ignazio Visco, yesterday openly criticising ECB colleagues for making forward-looking statements about monetary policy. Presumably, he was taking aim at remarks made on Monday by ECB arch hawk, Robert Holzmann, saying he favoured four 50bp hikes. Read next: ADP payrolls report hit 242K. Japan: YCC may remain unchanged| FXMAG.COM Public dissension amongst monetary policymakers is never welcomed by currency markets. The euro was plagued in its early years under President Wim Duisenbrg, who struggled to corral diverging views. And presumably, ECB President Christine Lagarde's job will only become harder on this front as the ECB takes rates higher into the summer. Please see a full preview of next week's ECB meeting here.  For the time being expect EUR/USD to trade in a 1.0500-1.0600 range and tomorrow's US jobs report will determine whether it needs to break below 1.0500. Elsewhere, the National Bank of Poland (NBP) held interest rates unchanged at 6.75% yesterday - as expected. NBP Governor Adam Glapinski speaks today. Presumably, he will be a little dovish. We would be wary of chasing any zloty gains near term given the risk of further negatives emerging on the FX mortgage story this month. Please see our March edition of FX talking for more on the EUR/PLN story. Chris Turner GBP: Sterling risks getting run over by more hawkish central banks elsewhere UK Monetary Policy Committee (MPC) member Catherine Mann's comments from earlier this week are resonating in FX markets. She said sterling risked coming under pressure from hawkish policy overseas. And certainly hawkish Fed remarks this week have taken their toll on GBP/USD which has traded down to 1.1800. In the March FX talking, we highlighted the outside risk of GBP/USD trading down to 1.1650. This certainly looks like the direction of travel looking at the stronger Fed policy trajectory now. We continue to favour EUR/GBP trading up to and staying near 0.90 over coming months given the risk of the Bank of England shifting to a pause far earlier than the Fed or the ECB. Chris Turner CHF: SNB may increase FX sales In a speech on Tuesday evening, Swiss National Bank President, Thomas Jordan, said the Bank's monetary policy was still too loose and that it could raise rates again, ‘but also sell foreign currency’. As we have discussed on these pages before, the SNB is trying to deliver a stable real exchange rate by delivering nominal Swiss franc appreciation. The fact that we are probably looking at the dollar holding its gains through a large part of the second quarter means that a weaker EUR/CHF will have to pick up a larger share of the CHF nominal appreciation. This is where FX intervention comes in. The SNB has been selling FX since 3Q last year and given Swiss inflation is still proving very sticky, it looks like the 1.0050/1.0100 area is becoming a hard ceiling for EUR/CHF in the first half of the year. We would say the direction of travel here is back towards the 0.9800/0.9825 area over the coming months. It could even be lower were the SNB to surprise with a 75bp hike on 23 March. Chris Turner  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
UBS buys Credit Suisse for $3.2bn. Last week was the worst one for equity markets in 2023

UBS buys Credit Suisse for $3.2bn. Last week was the worst one for equity markets in 2023

Michael Hewson Michael Hewson 20.03.2023 08:45
Having come off the worst week for European equity markets this year, volatility looks set to continue this week now that the fate of Credit Suisse appears to have finally been sealed in a $3.2bn deal that sees its rival UBS take over the bank in an all-share deal that also includes extensive Swiss government and SNB guarantees.   At the weekend there were reports that Credit Suisse had pushed back after it was reported that UBS was putting a price tag of up to $1bn on the embattled business, a price of CHF0.25c a share, paid in UBS stock, a number that was well below Credit Suisse closing share price of CHF1.86c on Friday. The weekend deal which still sees UBS pay CHF0.76c in its own stock, also sees the Swiss National Bank offer a further CHF100bn liquidity line and the Swiss government a loss guarantees of CHF9bn, in the event, UBS bears up to CHF5bn of losses on certain assets. With memories still fresh of how Lloyds Banking Group was forced into a shotgun marriage with HBOS back in 2008, and how ruinous that has been for long-term shareholder value, UBS was quite within its rights to assign a knockdown value on a bank where due diligence would take months to undertake. Some have suggested that UBS putting such a low-ball number on its interest means that Credit Suisse could be in more trouble than perhaps regulators are letting on, and while that might be true, it could also be UBS management being extremely cautious.  After all, with so little time in which to do due diligence, there could be all manner of hidden nasties lurking on its balance sheet, and while the eventual $3.2bn number came in higher than the initial $1bn offer, UBS is still taking a big gamble even as it tries to ensure that its shares don't get clobbered when they open later today. Read next: Next week begins with Nike earnings - profits expected to hit $0.53c per share| FXMAG.COM With Credit Suisse shareholders and some bondholders taking a huge hit, banks in Asia have taken a hit on similar concern about their AT1 bond holding values, while the weekend deal still presents the Swiss National Bank and Swiss Government with untold headaches, with the size of the newly merged bank set to dwarf the size of the Swiss economy. The phrase too big to fail really does spring to mind here, and this morning's weakness in Asia markets serves to reinforce concerns about these types of writedowns and any spillover effects on the rest of the banking sector.   As for Credit Suisse, it is in no position to dictate the price of any rescue package given the problems it was facing, and if its shareholders are unhappy with the price they've got, they should have stumped up the extra cash themselves! Looking ahead to this week the resultant market turmoil from last week's events in Europe, as well as the events in the US around Silicon Valley Bank, Silvergate, and Signature Bank have brought this week's Federal Reserve rate decision into sharp focus, prompting some to suggest that the Fed may well pause, or even cut rates this week. In an attempt to head off any potential problems, central banks have also increased the frequency of their US dollar swap operations to a daily occurrence until the end of April at least, to ensure financial conditions don't tighten too much.   With concerns over US and European banks likely to be still front of mind there is certainly a case for central banks to be cautious about the message they send about future rate rises, while financial stability is also part and parcel of their core mandate. Despite this, they also have to deal with concerns about sticky inflation, and unless they clamp down on rising prices, then today's problems could become even worse in the short term.  In a sense, the problems being caused by rising interest rates are a direct consequence of the very same central bank policies of easy money being allowed to continue for far too long, and now they are faced with having to put the genie back in the bottle. This means a rate cut this week is unlikely, and could even be unwise as it would suggest that the current problems are even more serious than markets currently believe. Last week the ECB decided to press on with a 50bps rate hike, however on this occasion very sensibly made any further rate rises very much data dependent, meaning that after this week, further rate hikes may well get deferred until things have settled down. Against such a difficult backdrop it's hard to imagine that only two weeks ago, further rate rises this week were a nailed-on certainty, for both the Federal Reserve, as well as the Bank of England. Now it seems very much an each-way bet, between a hike or a pause, despite recent economic data on both sides of the Atlantic coming in better than expected. Now as a result of some significant financial contagion caused by poor risk management practices at a number of small US tech lenders, and a loss of confidence in Credit Suisse after a major shareholder ruled out putting in more capital, we could well find that we're at or close to a rate hike peak. That doesn't mean rates will come down quickly however, it just means that rates could stay at highly elevated levels for a long time to come in the hope that inflation will eventually return to target over a much longer period of time.     EUR/USD – finding decent support in the area of 1.0510/30 area, with more solid support at 1.0480. Last week's highs at 1.0760 is a key resistance. GBP/USD – found support at the 1.1800 area earlier this month before rebounding back to the 1.2200 area. Currently rangebound between the recent peaks just below 1.2300, with a break below 1.1800 opening up the risk of a move towards 1.1640. EUR/GBP – ran out of steam at the 0.8920 area and has subsequently slipped back towards trend line support at 0.8720, from the lows last August. A break below 0.8700 could well see further losses towards 0.8620. USD/JPY – the failure to push above the 200-day SMA, earlier this month has seen the US dollar slide back, with the next key support at the 130.00 area. Resistance currently lies back at the 135.10/20 area.    FTSE100 is expected to open 70 points lower at 7,265 DAX is expected to open 133 points lower at 14,635 CAC40 is expected to open 80 points lower at 6,845
SNB stands firm in the face of market turbulence with 50bp rate hike

UBS Take over of Credit Suisse means over 50% of deposits will be held by a single institution

Walid Koudmani Walid Koudmani 20.03.2023 12:33
It is no secret that the trouble in the banking industry has been the main topic of discussion and mover of markets over the past week or so as governments and central banks scrambled to try and find a solution to the collapse and potential collapse of major names in the sector. Some of these efforts involved clients in the US being reassured that their funds would be available in an effort to prevent a further bank run while the headlines in Europe have all been surrounding the ongoing Credit Suisse debacle which some say may threaten the stability of the financial system in the continent.   Over the weekend, in an emergency meeting, several parties discussed alternatives and options aimed at salvaging the bank and giving relief to investors and the markets as we saw Credit Suisse's share price tank to their lowest levels as nothing seemed to help over the last week, not even news of a 50 billion CHF liquidity injection by the Swiss National Bank. Read next: Microsoft, Amazon and Google increased by nearly 15% last week| FXMAG.COM   As some expected would happen, UBS, the largest bank in Switzerland, as part of a deal brokered by the government will purchase Credit Suisse for 3 billion CHF and receive additional 9 billion CHF in government guarantees   As some expected would happen, UBS, the largest bank in Switzerland, as part of a deal brokered by the government will purchase Credit Suisse for 3 billion CHF and receive additional 9 billion CHF in government guarantees. On top of that, additional liquidity to a combined entity will also be provided in an effort to stabilize the situation. However, while initially this may have brought some calm to the market, share price of UBS dropped over 14% as investors continued to be on edge and as uncertainty returned. One of the main concerns could involve the fact that the UBS takeover of Credit Suisse leads to an interesting and potentially dangerous situation in the Swiss banking sector as merging the two largest Swiss banks means that over 50% of bank deposits in the country will be held by a single institution which in itself could be a serious risk if another bank run were to occur. As more details emerge and as the week progresses, there will be many events to keep an eye on including the central bank decisions that continue to be more relevant than ever as challenging macroeconomic situations now meet major headlines and banking scandals. This could prove to be one of the most volatile weeks of 2023 so far on the markets as investors flee to risk-off assets.
Ralph Shedler talks US dollar against Swiss franc - May 12th

Next Credit Suisse case developments may add volatility to Swiss franc

Kenny Fisher Kenny Fisher 20.03.2023 14:11
USD/CHF is trading quietly on Monday, after a tumultuous week. In the European session, USD/CHF is trading at 0.9276, up 0.15%. Credit Suisse takeover, central banks take action There was a flurry of activity on Sunday in response to the banking crisis which has shaved some $1 trillion from global financial shares this month. UBS has agreed to take over Credit Suisse, the second-largest bank in Switzerland. The move hasn’t stopped the bleeding at Credit Suisse, as its shares are down some 60% today. UBS shares are down 6% today and Deutschebank and other major European banks are also in the red. As well, six central banks, including the Swiss National Bank (SNB) and the Federal Reserve announced they had coordinated action in order to boost liquidity. This move is aimed at restoring market confidence in the global banking system, which has been rocked by the failure of two US banks and the meltdown at Credit Suisse. Read next: Microsoft, Amazon and Google increased by nearly 15% last week| FXMAG.COM The Swiss franc was not immune to the market mayhem, as the sharp fall in Credit Suisse shares on Wednesday sent the Swissie tumbling by 2.1% and only settled down after intervention by the SNB. The Swiss franc, traditionally a safe-haven bastion, has seen its reputation tarnished as Swiss banks are in the middle of a banking crisis. Further developments in the Credit Suisse saga could lead to more volatility in the Swiss currency. The market turmoil has seen market pricing for Wednesday’s Fed meeting shift from an increase of 50 basis points to 25, with an outside chance of a pause in hikes. The Fed has adopted a hawkish stance in its battle with inflation, but the latest crisis will make the Fed think twice about its pace of rate hikes. The markets have priced in a terminal rate in a range of 4.75% to 5.25%, and with the current rate at 4.50-4.75%, that means the markets are expecting the Fed to take a pause in the coming months. USD/CHF Technical USD/CHF is testing resistance at 0.9304. Above, there is resistance at 0.9382 0.9226 and 0.9110 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Swiss franc in calm waters, but is there are a storm ahead? - MarketPulseMarketPulse
SNB stands firm in the face of market turbulence with 50bp rate hike

UBS will take over Credit Suisse. According to Conotoxia, it may entail restructuring decisions, cost cutting

Conotoxia Comments Conotoxia Comments 20.03.2023 16:11
On Sunday (19.03), UBS announced the acquisition of Credit Suisse bank for more than $3.24 billion. Colm Kelleher, chairman of UBS, said it was an "emergency rescue" for Credit Suisse, while UBS sees the deal as an investment opportunity. UBS says the merger will have a positive impact on the bank's profits, with savings of $8 billion a year by 2027. Credit Suisse is to be wound down as part of the acquisition, and the integration of the two banks will take about four years. What can we expect from the acquisition and what impact will it have on UBS? A few words about UBS and the Credit Suisse situation UBS (United Bank of Switzerland) is an international investment bank that provides financial services to individuals, companies and institutions worldwide. The bank offers a wide range of products, including private banking, corporate banking, asset management, investment services, M&A advisory and project finance. UBS was formed in 1998 from the merger of two Swiss banks: Union Bank of Switzerland and Swiss Bank Corporation. Today, the bank is headquartered in Zurich and operates in more than 50 countries around the world, with more than 70,000 employees and it is the largest private Swiss bank. For more than a year, we have heard about the problems of the second largest Swiss bank, Credit Suisse, which has been struggling with, among other things, numerous lawsuits, money laundering scandals, which has caused customers to lose confidence in the bank and start withdrawing funds from the bank. Previous banking crises were caused by hidden losses, which does not seem to be the case for Credit Suisse. According to investment firm Axiom Alternative Investments, the bank is regarded as the weakest link among global systemic banks. And its problems stem from the fact that its customers have chosen to withdraw funds from their bank accounts. Credit Suisse Bank has experienced a $270 billion reduction in the value of its assets in just the past year alone, a 32% drop as a result of a more than 50% drop in its $215 billion cash holdings. These problems have led to the share price falling from CHF 14 to CHF 2 (a drop of as much as 85%). Source: Conotoxia MT5, Cred. Suisse, Daily What impact will the acquisition of Credit Suisse have on UBS? Following speculation and concerns about the banking crisis, UBS has decided to take over its long-standing Swiss rival. UBS CEO Colm Kelleher defined: "This acquisition is attractive to UBS shareholders, but let's be clear, as far as Credit Suisse is concerned, this is a crisis rescue." The acquisition will be for $3.24bn, which, with the bank's current market capitalisation of $6.26bn, could be a long-term opportunity for UBS. Nonetheless, investors seem to be taking it negatively, as UBS shares have fallen by more than 17% since the beginning of March. We could assume that the takeover decision has been driven by fears of a possible panic of a massive capital outflow from the Swiss banking sector. It seems that the takeover could not take place without drastic restructuring decisions, which may include numerous cost-cutting measures through, among other things, staff cuts. Source: Conotoxia MT5, UBSGroup AG, Daily UBS appears to be able to take over Credit Suisse and provide it with liquidity without too many problems. UBS's cash is worth $204 billion, so the purchase of Credit Suisse alone is only 1.5% of the bank's cash holdings. However, it is important to remember that with the acquisition of the bank's assets, UBS will take over its liabilities and problems. However, if UBS manages to restructure successfully, it will be able to talk about taking over one of its key competitors. Read next: Microsoft, Amazon and Google increased by nearly 15% last week| FXMAG.COM An inevitable coincidence with the collapse of the SVB It might seem that the problems in the US banking sector caused by the collapse of Silicon Valley bank SVB were a prelude to the announcement of Credit Suisse's lack of liquidity. However, it is important to stress that the problems of the two banks are distinct from each other. The collapse of SVB appears to have been caused by Fed policy and the mishandling of its debt portfolio. SVB was a major bank financing high-tech projects and startups. As interest rates were raised and monetary policy tightened, debt became more expensive and less available. In this case, the prices of the bonds in which the bank invested its funds fell, which would not have been a problem if funds had been held to redeem them. However, due to the large outflow of funds from the bank, it was forced to sell its assets at unfavourable prices, leading to a huge loss and loss of liquidity. This is in contrast to Credit Suisse's problems, which had been accumulating for a long time, and the loss of liquidity was due to a gradual loss of confidence in the institution by clients. Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US dollar pressured by Euro and Swiss franc. EUR and CHF supported by data and a rate hike

US dollar pressured by Euro and Swiss franc. EUR and CHF supported by data and a rate hike

Michalis Efthymiou Michalis Efthymiou 23.03.2023 14:05
The EUR/USD is forming its seventh consecutive bullish candlestick on the daily timeframe. This morning's price again renewed its weekly and monthly high and is 0.35% higher than the daily open price. Investors continue to ditch the US Dollar as other currencies become more attractive. The Dollar has come under pressure from the liquidity crisis and the Fed’s dovish tone. Chart, waterfall chart Description automatically generatedEUR/USD 2-Hour Chart on March 23rd The Dollar is specifically under pressure from the Euro and the Swiss Franc. Both currencies were supported by stable economic figures and also a 50 basis point hike. This morning the USD/CHF moved 0.60% in favour of the Franc after the Swiss National Bank hiked a further 0.50%, double that of the Fed. This morning the USD/CHF moved 0.60% in favour of the Franc after the Swiss National Bank hiked a further 0.50%, double that of the Fed Most economists and analysts have advised investors to look for alternatives to the Dollar, including other currencies, cryptocurrencies, and safe haven assets. Investors have expressed dissatisfaction with the US financial system and Powell’s comments on the “uncertain economic future.” So far, investors have opted for other currencies where the Central Bank has taken a more hawkish tone. This includes the Euro and the European Central Bank. On the other hand, technical analysts are concerned about the Dollar being undervalued in the short term. Summary of the update by NAGA: The Federal Reserve increases interest rates by a further 0.25% but signals an “uncertain economic future.” Treasury Secretary, Janet Yellen, confirmed there are no such discussions or plans to introduce any kind of additional deposit guarantees. The NASDAQ increased during this morning’s Futures Market but experienced a strong selloff after yesterday’s Powells-Yellen press conference. Investors favour other currencies and safe haven assets over the Dollar due to a weak hike and uncertainty. Read the first part here and the second part here.
SNB stands firm in the face of market turbulence with 50bp rate hike

SNB stands firm in the face of market turbulence with 50bp rate hike

ING Economics ING Economics 23.03.2023 16:05
Despite the events related to Credit Suisse, the Swiss National Bank (SNB) has not flinched and decided to raise its interest rate by 50 basis points to 1.5% SNB Chairman Thomas Jordan speaks during a media briefing in Zurich, Switzerland, 23 March 2023 Inflation is too high Given the inflationary environment, this decision was expected. Compared to other developed economies, inflation in Switzerland has been relatively low, reaching a maximum of 3.4%. Nevertheless, the recent upward trend has not been good. After stabilising in the summer of 2022 and falling at the end of last year, inflation has been rising again since the beginning of the year, and faster than expected. In February 2023, headline inflation reached 3.4% and core inflation 2.4%, its highest-ever level. This is well above the SNB's objective of having inflation between 0 and 2%, which justifies the rate hike. Moreover, the SNB is unique in that it only meets every quarter, which is much less often than the other major central banks. As a result, today marked only the fourth rate hike for the SNB, increasing by a total of 225 basis points, compared to 350bp for the ECB and 500bp for the Fed. Foreign currency selling In addition to the interest rate hikes, the SNB says it continues to be active in the foreign exchange market, mainly by selling currencies. After years of buying currencies to limit the appreciation of the Swiss franc, the SNB is now selling foreign currencies to strengthen the Swiss franc and limit imported inflation. The SNB says it sold about 27 billion Swiss francs worth of foreign currency in the fourth quarter of 2022, and it plans to continue doing so in the coming months. Its currency sales are therefore the second instrument of the SNB's monetary policy in its fight against inflation. No trade off? The SNB seems to consider that the events linked to Credit Suisse and the threats to financial stability can be managed with other instruments than interest rates, such as liquidity provision. It believes that the decisions taken last weekend "have put a halt to the crisis", so there is nothing to stop it from focusing on inflation again. Like the ECB, the SNB is therefore trying to convince the markets that there is no trade-off between the price stability mandate and the financial stability mandate. If this can be seen as a sign, the exceptional interest from the markets and the press in today's SNB decision probably shows that not everyone is (yet) convinced. In our view, the two mandates can indeed be managed with different instruments, but only to a certain extent. Furthermore, there is little doubt that fears about financial stability will have an impact on the availability of credit and thus on the economic situation and the inflation environment in the coming months, which will ultimately influence the path of interest rates. Higher inflation forecasts The SNB's inflation forecast was revised upwards in March. It now expects average inflation to be 2.6% in 2023 (compared to the December forecast of 2.4%) and 2.0% in 2024 and 2025 (compared to the December forecast of 1.8% for 2024). Inflation is thus expected to be 2% or more over the entire forecast horizon. Moreover, the SNB expects inflation to rise to 2.1% by the end of 2025, a figure higher than its target. Its forecast sends a rather hawkish signal, suggesting that further rate hikes are in store for the SNB. It says “it cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term". Read next: Philippines: BSP downshifts to 25bp increase| FXMAG.COM We believe that a further rate hike is likely in June, but given the economic slowdown, which is likely to be exacerbated by concerns about the banking system, this hike is likely to be limited to 25bp to 1.75% and will probably be the last. After that, the interest rate is likely to remain at this level for a long period. FX: Franc gains likely to emerge versus the dollar The Swiss franc rose after the SNB hike, with EUR/CHF briefly touching 0.9940 before bouncing back to the 0.9970 level at the time of writing. As highlighted above, the SNB actively favours a stronger CHF to limit imported inflation, but the ECB-SNB policy differential and an improvement in European sentiment are tilting the bias towards a stronger EUR/CHF at the moment, where a stabilisation above parity seems likely in light of recent developments. The channel where we could see the SNB hawkishness play in favour of CHF is probably through USD/CHF, where we may see a break below the 0.9080 early-February lows, also aided by the generalised USD weakness. Read this article on THINK TagsSwitzerland Swiss National Bank SNB Monetary policy Interest Rates CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ZEW Economic Expectations came in at -41.3. Swiss retail sales go public on Friday

US dollar and CHF could be safe havens in the event the turmoil in banks intensify globally

John Hardy John Hardy 23.03.2023 23:54
The SNB decision to hike 50 basis points was expected and the bank reserves the ability to hike again if it feels this will be necessary. This hasn't been read as a significant surprise by the market as yields have eased back lower after the sharp rise of the prior couple of days in the wake of the weekend emergency measures to manage the takeover of troubled Credit Suisse. The USDCHF cross has gyrated since the trouble in the US banking sector broke out so suddenly on March 9th but continues to stay in the range.  The USDCHF cross has gyrated since the trouble in the US banking sector broke out so suddenly on March 9th but continues to stay in the range This SNB decision doesn't have much bearing on CHF for now, and both the US dollar and CHF could be safe havens in the event the turmoil in banks intensify globally, but the attention on this cross Is likely only to pick up if either the 0.9050 area falls (SNB likely to sell currency to slow CHF strength if that occurs if EURCHF is also lower, i.e., SNB wants to support competitive export sector) or if it rises aback to 0.9400+ (SNB only likely to push back against that with intervention if inflationary pressures are worsening, though more likely that rate moves are more prominent tool on a sharply weaker CHF). Read next: Ford Motor Company will lose a lot of money on electric vehicles, but there's a positive news as well | FXMAG.COM
Unexpected drop in Swiss inflation may complicate SNB decision

USDCHF drifted further after the SNB decision, down to 0.9116

Andria Pichidi Andria Pichidi 24.03.2023 14:49
Swiss National Bank has recently decided on the interest rate choosing a 50bp variant. Andria Pichdi from HF Markets comments on the decision. FXMAG.COM: Could you please comment on the SNB decision after it's made? What's ahead of USD/CHF? Andria Pichdi (HF Markets): Having in mind the recent Credit Suisse events, the SNB went ahead with the 50 bp rate hike that had been expected, in order to counter "the renewed increase in inflationary pressure" as they stated. So the 50 bp was well justified considering the events of the past 2 weeks and the potential aftermaths of the Credit Suisse takeover and the AT1 bonds rescue on inflation and the economy in general. USDCHF drifted further after the SNB decision, down to 0.9116. Read next: UK economy: inflation exceeded expectations, Nasdaq 100 finished higher yesterday| FXMAG.COM Key support level for USDCHF remains the 1-year support area, i.e. 0.9050-0.9100 Andria Pichdi (HF Markets): Considering that it’s too early to claim that the banking crisis is over, that inflation is now expected at 2.6% (was 2.4%), and still at 2.0% (was 1.8%) in 2023, that economic activity is expected to remain subdued, and that vulnerabilities on the mortgage and real estate markets will persist, further tightening is expected, something that could increase further the bearish bias in the USDCHF. Key support level for USDCHF remains the 1-year support area, i.e. 0.9050-0.9100. A dive below that area could endorse the bearish structure to 2021 and 2020 lows at 0.8900 and the 0.8760 barrier. A resilience of USDCHF however above 0.9050-0.9100 cannot be interpreted as a bullish signal, as the asset remains well below the 50- and 200-week SMA.
Unexpected drop in Swiss inflation may complicate SNB decision

Unexpected drop in Swiss inflation may complicate SNB decision

Kenny Fisher Kenny Fisher 03.04.2023 15:55
USD/CHF is unchanged in the European session, trading at 0.9150. The Swissie pushed higher earlier but has given up those gains. Switzerland’s inflation rate fell to 2.9%, down from 3.4%, and the drop could make the Swiss central bank think twice about another rate hike in June. The US releases ISM Manufacturing PMI, which is expected to post another decline, with an estimate of 47.7 points. Swiss inflation underperforms Swiss inflation fell to 2.9% y/y in March, down from 3.4% in February and below the estimate of 3.2%. On a monthly basis, inflation slipped to 0.2% in March, vs. 0.7% prior and 0.4% anticipated. The driver behind the drop was lower fuel costs. Switzerland’s inflation levels may be the envy of other major economies, but the Swiss National Bank (SNB) finds itself in a tough fight, given that inflation has exceeded its 0%-2% target for over a year. The SNB has been very aggressive, relatively speaking, with its rate policy in order to contain inflation. The SNB delivered a 50-basis point hike in March, marking a fourth straight increase which brought the cash rate to 1.5%. The rate hike helped propel the Swiss franc in March when it gained 2.5% against the US dollar. Read next: RBA decision: according to Governor Lowe, inflation, employment and consumer spending data would play vital role| FXMAG.COM What’s next for the SNB? The next meeting isn’t until June, and prior to the inflation release, there was a reasonable likelihood of another rate hike. The unexpected drop in CPI could complicate that decision, as policymakers will have to give thought to a 25-bp hike or even a pause in rates, as the economy is showing signs of weakness. GDP was flat in the fourth quarter, and last week’s numbers were soft. The KOF Economic Barometer fell to 98.2, down from 98.9 and below the estimate of 100.5 points. Retail sales posted a weak gain of 0.3%, better than the prior release of -1.7% but shy of the forecast of 1.9%. If inflation continues to head south, policy makers will have their excuse to ease up on the pace of rates and give the economy a break. Weak manufacturing remains a global problem, as the Russian invasion of Ukraine and China’s zero-Covid policy disrupted supply chains and dampened demand. On Friday, Swiss manufacturing PMI dipped to 47.0 in March, down from 48.9 in February which was also the consensus forecast. US ISM Manufacturing PMI will be released later today and is expected to weaken to 47.5 in March, down from 47.7 in February. USD/CHF Technical USD/CHF tested resistance at 0.9164 earlier in the day. The next resistance line is 0.9221 0.9104 and 0.9002 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/CHF - Swiss franc steady, inflation lower than expected - MarketPulseMarketPulse
Ralph Shedler talks US dollar against Swiss franc - May 12th

FX Daily: Tense markets, but dollar bear trend should win out

ING Economics ING Economics 05.05.2023 13:39
Continued focus on the health of the US regional banks has seen levels of money market stress edge higher. US policymakers will be looking at ways to patch things up, but the clear overall trend should be one of tighter credit conditions and weaker US growth. This should help take the steam out of inflation and send the dollar lower. For today, US NFP is in focus The dollar has weakened on bank sector fears USD: The case for a weaker dollar is building It has been a busy week of central bank policy meetings and also continued stress among the US regional banks. On the latter, there now seems to be growing scrutiny amongst regulators of the short-selling activity in these regional bank stocks and whether any market manipulation took place. US regulators, such as the Securities and Exchange Commission (SEC), have stopped short of instituting a ban on the short-selling of bank stocks (as we saw in 2008), but the point is that we have reached the stage when such policy action is being discussed. The continued volatility in these bank stocks is keeping money market conditions tense. The 3-month USD FRA-OIS spread is nudging wider again, as is the 3m EUR cross-currency basis swap. Typically, this is a sign of market nervousness and is not conducive to the kind of benign dollar decline that floats developed and emerging currencies alike. What would help such a trend, however, would be softer US activity and price data which would allow the Federal Reserve to cut rates. That brings us to today's US April NFP data. Consensus expects a decent, but softer, 185k increase in the headline jobs data and average hourly earnings increasing at 0.3/4.2% month-on-month/year-on-year. Any softness in activity or price data would be supportive of market pricing of the first Fed cut in September and would be dollar bearish. Conversely, any above-consensus price data would add to recent sticky inflation releases such as the first quarter Employment Cost Indicator. This would see a bearish flattening of the US yield curve and send the dollar higher. Looking at the bigger picture, however, it seems clear that tighter US credit conditions will only exacerbate the 2023 US slowdown and disinflation process and we suspect there will be plenty of dollar sellers should we see any surprise 1-2% rally in the dollar over the next couple of weeks. DXY has the lows of the year at the 100.75/85 area. Chris Turner EUR: ECB muddies the water a little Two-year euro swap rates fell by 12bp yesterday and EUR/USD softened after the ECB offered a slightly less hawkish than expected 25bp hike. The ECB's statement emphasised that past tightening has been transmitted 'forcefully' to euro area financing conditions and that the lags and the strength of that transmission remain uncertain. That buys the ECB some time and has been used by other central banks around the world too. However, ING's Carsten Brzeski's takeaway from the meeting was that the door remains open for further rate hikes. Indeed, we look for another 25bp hike in June.  We doubt such ECB equivocation will dent EUR/USD for too long. And in addition to what should clearly be supportive interest rate trends for EUR/USD this year should be much lower energy prices which have delivered a vast improvement in the euro's terms of trade. This is a complete reversal of conditions that were weighing on EUR/USD in the third quarter of last year. We suspect EUR/USD finds some good demand near 1.0900 now and we are just waiting for some softer US activity or price data to unlock a break of 1.1100. Chris Turner CHF: Swiss franc in demand As we have been noting recently, we think the defensive (non-correlated) properties of the Swiss franc are in demand. Expect that to continue to be the case until the dust starts to settle in the US regional banking crisis. More locally, we have some Swiss data and a rare speech from Swiss National Bank President Thomas Jordan at 11CET. On the local data front, we will see April FX reserve data. Swiss FX reserves have fallen about CHF200bn since the start of 2022 – partly due to valuation effects and partly due to the SNB intervening in FX markets to sell EUR/CHF. The latter is part of the SNB's strategy to keep the real CHF stable, which requires nominal CHF appreciation. With Swiss inflation (today released at 2.6% YoY for April) still dramatically lower than that in the eurozone, the SNB will continue to seek nominal CHF appreciation.   We favour EUR/CHF to grind down to the 0.9700 area – lows seen when the US banking crisis first broke. Chris Turner Read next: Indonesia: first quarter GDP steady despite high inflation and slowing global trade| FXMAG.COM NOK: Norges Bank might come to the krone's rescue Yesterday, Norges Bank hiked rates by 25bp and signalled a similar move in June, in line with the latest rate projections (peak rate at 3.5%). We must remember that Norges Bank has turned increasingly hawkish explicitly to support the krone, and we heard again some currency protest by Governor Ida Wolden Bache. She reiterated that “if the krone remains weaker, a higher policy rate than envisaged earlier may be needed” and added that the recent krone weakness is larger than what can be explained by forecasting factors. We agree with the Governor, and NOK is indeed quite undervalued due to its low liquidity character and consequent sensitivity to risk sentiment. However, Norges Bank tightening is falling short of supporting NOK, and while larger cuts to daily FX purchases look warranted in June, it now seems increasingly likely that NB will need to raise rates beyond the projected summer peak of 3.5%. We still expect volatility and vulnerability in the krone in the near term, but then a recovery in the second half of the year. EUR/NOK should be able to sustainably return below 11.00 by year-end.  Francesco Pesole Read this article on THINK TagsSwiss Franc Norges Bank FX Daily ECB Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forecasting the Future of Bitcoin: Analyzing Critical Price Levels for the Second Half of 2023

Swiss National Bank Anticipated to Raise Interest Rates Amid Hawkish Stance

Kenny Fisher Kenny Fisher 22.06.2023 08:24
Swiss National Bank expected to raise interest rates on Thursday Fed Chair Powell testifies before Congress Wednesday and Thursday The Swiss franc is showing little movement on Wednesday, trading at 0.8984 in the North American session.   Will Swiss National Bank deliver a hawkish surprise? The Swiss National Bank will announce its rate decision on Thursday, and the meeting is live, as the markets have priced a 0.50% hike at 60% and a 0.25% at 40%. The current benchmark rate is 1.50%. SNB Chair Jordan hasn’t missed an opportunity to send out warnings that inflation remains too high. Earlier this month, Jordan stated that inflation “is more persistent than we initially thought” and that with rates at a low 1.5%, it wasn’t a good idea to keep rates low and face higher inflation later. Jordan’s rhetoric has remained hawkish even though inflation is low in Switzerland and fell to 2.2% in May. Other central bankers would be happy to switch roles with Jordan, with inflation around 2%, but the SNB is not happy with the inflation picture. Inflation remains above the Bank’s 0%-2% target and Jordan appears willing and able to continue hiking in order to curb inflation. The SNB, once known for its negative rates, has been aggressive, raising rates by 225 points in the current tightening cycle. It should be remembered that since the SNB meets only four times a year, the SNB may opt for a 0.50% hike at Thursday’s meeting in order to get “a bigger bang for the buck”.
Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

SNB Raises Rates by 25bp, Signals Further Tightening in Store

ING Economics ING Economics 22.06.2023 11:45
SNB hikes rates by 25bp and signals further tightening still to come The SNB raised its policy rate by 25 basis points as expected, while at the same time sending out a very hawkish signal. With the central bank expecting inflation to remain persistent for some time, another 25bp move is expected for September.   25bp rate hike as expected As expected, the Swiss National Bank has raised its key interest rate by a further 25 basis points to 1.75%. This brings the total amount of rate hikes in this cycle to 250 basis points in one year, well below the European Central Bank's 400bp and the Federal Reserve's 500bp. At the same time, the SNB continues to intervene in the foreign exchange market by selling currencies, thereby strengthening the Swiss franc and bringing down imported inflation. After years of foreign currency purchases, this reduces the size of the SNB's balance sheet and is therefore a particularly effective form of quantitative tightening against inflation.   Long-term inflation concerns This rate hike comes against a backdrop in which inflation remains above the SNB's inflation target of between 0 and 2% – although it has fallen sharply. It reached 2.2% in May, a steady decline from the 3.4% reached in February 2023. Core inflation fell below 2% to 1.9% in May. Thanks to lower energy prices and the appreciation of the Swiss franc, the SNB expects inflation to continue to fall to 1.7% in the third quarter.   Despite this encouraging decline, the SNB continues to see inflation as a problem and expects it to strengthen over the coming winter due to second-round effects. Inflation is also expected to become increasingly domestic, and therefore less easily combatted by strengthening the exchange rate. Of particular concern is an expected rise in rents, which account for 16% of the consumer basket and are indexed to interest rates in Switzerland.   In light of this situation, the SNB has revised up its inflation forecasts for the next few years and now expects inflation to remain above 2% until the end of the forecast horizon in the first quarter of 2026. It's expected to average 2.2% in 2023, 2.2% in 2024 and 2.1% in 2025. In other words, aside from the fall expected this autumn, the SNB does not expect any moderation in inflationary pressures and believes that the current situation is likely to persist. This signal growing concerns about the long-term outlook for inflation.   Another hike expected in September This upward revision of forecasts is a particularly hawkish signal and suggests that the SNB will raise rates again. President Thomas Jordan almost pre-announced this at the press conference, stating that tighter monetary policy will be necessary to bring down inflation. As a result, we are now expecting another rate hike of 25 basis points in September.   At a time when other central banks seem to have lost confidence in their models and are looking primarily at the actual rate of inflation, the SNB seems to be taking a different approach by focusing primarily on inflation forecasts. The fact that the ECB is likely to be more aggressive than previously expected – probably raising rates again in July and September – should further reinforce the SNB's decision. After September, the SNB rate is likely to remain at 2%, with a rate cut looking unlikely between now and 2026.
Nasdaq 100 Faces Bearish Breakdown Below Ascending Wedge and RSI Momentum Indicator

NB Signals Continued Tightening Amidst Inflation Concerns

Craig Erlam Craig Erlam 22.06.2023 11:50
The Swiss National Bank slowed the pace of its tightening cycle on Thursday, in line with market expectations but signaled there is more to come. While most central banks would dream of 2.2% inflation right now, the SNB has made clear that there will be no complacency. Today's hike likely doesn't mark the end of its cycle, with another 25 basis points expected in September.   Having previously indicated that he believes the neutral rate is around 2%, Chair Thomas Jordan has effectively signaled to the markets that they won't be done until at least this level is reached and today's comments support that. As did the forecasts, which assuming steady rates, had inflation remaining above 2% in two years' time. In other words, more tightening will be necessary, alongside currency interventions, in order to get inflation back below 2%. ​ Despite some initial volatility, the Swiss franc is only a little lower on the day and not far from its pre-release levels. Against the dollar it has been trending sideways for more than a month and today's decision has so far failed to sway it one way or another. A move below 0.8850 could make things interesting, as could a move above 0.91, but with the price sitting almost in the middle of these two levels currently, we may have to wait a little longer yet. Markets are pricing in a strong chance of another hike in the cycle while indicating a small chance that the central bank is done. There is still a long way to go in the global inflation fight and, if the last couple of years are anything to go by, there may be some more twists and turns to come. ​
Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

FX Daily: Inflation Takes Center Stage as Geopolitical Events Have Limited Impact

ING Economics ING Economics 26.06.2023 10:38
FX Daily: Inflation remains the market’s priority Events in Russia have had little discernible impact on the FX market so far. Instead, the hot topic of high inflation and what policymakers are prepared to do about it remains the market's priority. This will be at the top of the agenda at this week's ECB's annual symposium in Sintra. Expect another mixed week in FX markets and possible BoJ intervention.   USD: Geopolitics has yet to make its mark Events in Russia this weekend have so far had very little impact on global financial markets. There has been no flight to quality rush into the short end of the US Treasury market (two-year yields are down only 2bp since Friday), crude oil failed to hold onto some very modest gains in Asia, and Asian equity price action was muted. In FX, it is hard to discern any flight to quality into the dollar, nor discernible outperformance of defensive currencies like the Japanese yen and the Swiss franc. The muted response probably reflects i) a lack of clarity over what comes next after this challenge to President Putin's authority and ii) financial markets having already experienced a year of a stronger dollar and higher energy prices after the Russian invasion of Ukraine.   Instead, the market is very much focused on inflation. Both central bankers and governments are under fire for having kept monetary and fiscal policy respectively too loose for too long. These (or at least monetary policy anyway) will be the hot topic for this week at the ECB annual symposium in Sintra. Many of the G7 central bank governors are in attendance and presumably will deliver a hawkish message, similar to the one that Federal Reserve Chair Jerome Powell delivered to Congress last week.   This means that yield curves look to remain very inverted as investors assess the degree of looming recession and that the dollar will stay strong against those currencies without a monetary defence – i.e., USD/JPY stays bid. In addition to Powell's comment at Sintra on Wednesday, the US highlight this week will be the release of the core PCE inflation data for May. This is released on Friday. Expected at 0.4% month-on-month, another high reading for core inflation suggests there can be no let-up in the Fed's hawkishness.   DXY can probably bounce around in a 102.00-103.00 range this week, while USD/JPY should edge closer to the 145 intervention zone.  
Swiss Inflation Falls Below Expectations; US Markets Closed, Fed Minutes Awaited

Swiss Inflation Falls Below Expectations; US Markets Closed, Fed Minutes Awaited

Kenny Fisher Kenny Fisher 04.07.2023 15:48
Swiss inflation lower than expected US markets closed on Tuesday Fed minutes will be released on Wednesday The Swiss franc is showing little movement on Tuesday, trading at 0.8959 in the European session. US markets are closed for the July Fourth holiday and we can expect a quiet day for USD/CHF.   Swiss inflation falls to 1.7% Switzerland’s inflation rate dipped in June to 1.7% y/y, down from 2.2% in May and just below the consensus of 1.8%. On a monthly basis, inflation rose 0.1%, down from 0.3% and below the consensus of 0.2%. Core inflation eased to 1.8% y/y, down from 1.9%. Swiss National Bank President Jordan has often complained that inflation remains too high, although other central bankers, who are grappling with much higher inflation, would be happy to change places. Both the headline and core rates have now dropped into the Bank’s target range of 0%-2%, which should lend support to the SNB taking a pause at the September meeting. However, Jordan has been quite hawkish and one positive inflation report may not be enough to convince the SNB that the decline in inflation is temporary. The markets have priced in a 66% probability of a 0.25% in September, which would bring the cash rate to an even 2.0%. US markets are closed today, but Wednesday should be a busy session as the Fed releases the minutes from the June meeting. The markets are widely expecting a rate hike in July, and there are growing concerns that if the Fed continues to hike, the economy will tip into a recession.  The spread between 2-year and 10-year Treasury note yields deepened to a 42-year high on Wednesday, raising fears of a recession. A yield curve inversion is considered a reliable indication of a recession and the current inversion has been in place since July, raising fears about the direction of the US economy.   USD/CHF Technical USD/CHF is testing support at 0.8961. Below, there is support at 0.8904 0.9009 and 0.9081 are the next resistance lines  
EUR/USD Faces Resistance at 1.0774 Amid Inflation and Stagflation Concerns

FX Daily: Underdogs Rally Ahead of US CPI Release

ING Economics ING Economics 12.07.2023 09:08
FX Daily: Underdogs make a comeback ahead of US CPI It has been a good week for the underdogs in the G10 FX world. The Japanese yen, Norwegian krone, Swedish krona and Swiss franc led the gains against the dollar over the last week. This may well be a position adjustment against the risk of a benign US CPI print today and a tweak in Bank of Japan policy at the end of the month. Today's CPI reading will therefore be key.   USD: Benign CPI could unlock a leg lower lower in the dollar Another European morning follows another Asian session where USD/JPY has led the dollar lower. The Japanese yen has now appreciated 3.6% against the dollar over the last week, closely followed by NOK (+3.4%), SEK (+2.7%) and CHF (+2.4%). We discussed some of the push-pull factors driving the dollar in yesterday's update, but the outperformance of these underdog currencies clearly points to some position adjustment at work. The broad-based nature of the rally in these currencies suggests investors may be anticipating a more benign US price environment like the one we saw in November last year when the US started to print core inflation at 0.3% month-on-month after a string of 0.6% releases. That nicely brings us to today's main event, which is the June CPI release at 14:30CET. Expectations are for a more benign 0.3% MoM core reading - the lowest since last November - and base effects bringing the headline CPI down to just 3.1% YoY - the lowest since March 2021. Assuming no nasty upside surprises here, this may be enough to firm up a view that a 25bp Fed hike may well be the last in the cycle. If so, DXY could make a run at the year's lows near 100.80. A quick word on the yen. Developments in USD/JPY - especially the sell-off in early Asia - seem to be led by selling in the JGB bond market. Here, 30-year JGB yields are rising - spreads between 30-year US and Japanese government bonds have narrowed 12bp over the last week - and the Nikkei equity index is underperforming. This has all the hallmarks of position adjustment before the 28 July Bank of Japan (BoJ) policy meeting, where expectations are growing that the BoJ could switch to targeting the five-year part of the JGB yield curve - another small step to policy normalisation. In short, then, this USD/JPY move looks driven by the private not public sector (i.e. no intervention) and something like 138.25 looks like a near-term target for USD/JPY assuming today's US CPI data does not surprise on the upside    
Unlocking the Future: Key UK Wage Data and September BoE Rate Hike Prospects

FX Daily: US Treasury Wobble Sparks Risk Asset Concerns, Boosts Dollar

ING Economics ING Economics 03.08.2023 10:18
FX Daily: US Treasury wobble unnerves risk assets A sell-off at the long end of the US Treasury market has cast a shadow over risk assets and hit cyclical currencies. The dollar has been the main beneficiary. Expect focus to very much remain on the US bond market into next week's quarterly refunding. For today, attention is on whether the BoE hikes 25bp or 50bp and how Brazilian assets react to the 50bp rate cut.   USD: Tracking Treasuries Wednesday's session was all about the US bond market and the sell-off at the long end of the curve. US 30-year Treasury yields were briefly 15bp higher. And far from the benign bullish disinversion of the curve we saw after the soft June CPI print, yesterday's move was a more negative bullish steepening. Higher risk-free rates hit US growth stocks (Nasdaq -2%) and also hit 'growth' currencies, such as the commodity complex and the unloved Scandi currencies. At the heart of yesterday's move was the US fiscal story. Despite the Democrat administration and its supporters in the media decrying Fitch's decision to remove the sovereign's AAA status on Tuesday evening, there is genuine concern over US fiscal dynamics. And it looks like the Fitch release was carefully timed. Yesterday also saw a slightly higher than expected US quarterly refunding announcement, where $103bn of 3, 10, and 30-year bonds will be sold next week. The fact that fiscal dynamics were in play yesterday was reflected in wider US asset swap spreads (Treasuries underperforming the US swap curve) and the US yield curve steepening. As above, higher risk-free rates are providing greater headwinds to risk asset markets - including equities. We are also seeing some slightly higher cross-market volatility readings which may prompt investors to partially de-risk from carry trade strategies (good for the Japanese yen and Swiss franc on the crosses, bad for the high yielders). We will also be interested to see how the Brazilian real performs today after Brazil's central bank started its easing cycle last night with a 50bp cut and promised similar magnitude cuts over coming meetings. The currency could edge a little lower today given the international environment. While the US Treasury story will be with us into next week's auctions, the focus today will be on the initial jobless claims (these have been moving markets) and the services ISM index. Barring a significant rise in claims or a big dip in the services ISM, it looks like the dollar will hang onto recent gains into what should be a decent US July nonfarm payrolls report tomorrow.    DXY could grind its way toward the 103.50 area.  
Eurozone PMI Shows Limited Improvement Amid Lingering Contraction Concerns in September

Eurozone Economic Focus: Navigating Through August CPI and ECB Signals

ING Economics ING Economics 31.08.2023 10:32
EUR: Focus on the eurozone August CPI Flash August CPI data for the eurozone is released at 11:00 am CET today and is expected to show a gradual decline in both headline and core YoY readings to 5.1% and 5.3%, from 5.3% and 5.5% respectively. However, the decline is proving gradual and we are actually starting to see expectations of one more rate hike from the European Central Bank firm up a little. These peak at around 21bp of tightening priced in for January next year. Our macro team feels that the chances of a September rate hike are under-priced (now a 43% probability) meaning that EUR/USD could get a little support from the ECB story over the coming weeks. Today, also look out for a 09:00 am CET speech from ECB hawk Isabel Schnabel, speaking at a conference on 'Inflation: Drivers and Dynamics'. We will also see the ECB minutes for the July policy meeting released at 1:30 pm CET. EUR/USD has turned a little more bid over the last few days as US jobs data has softened the front end of the US yield curve and sticky inflation has kept EUR short-dated interest rates supported. Our short-term Financial Fair Value model sees EUR/USD fairly priced near 1.0900 - suggesting a probably range-bound session into tomorrow's US NFP release. Elsewhere, we note that Switzerland is planning some new large-scale Anti Money Laundering measures for 2024. This may be a slow-burn story, but one which may ultimately weigh on the Swiss franc in 2024.
US Core PCE Deflator: Deciphering Signals for Fed Policy Amidst Slowing Inflation - 27.11.2023

2024 G10 FX Outlook: Navigating a Dollar Bear Trend and Protecting Against Volatility

ING Economics ING Economics 16.11.2023 12:20
A year ago writing for the 2023 G10 FX outlook, we were calling for less trend and more volatility. That worked for the first half of the year before a dollar bull trend took over. Based on our call for Fed easing next year, we now argue that G10 FX markets will be characterised by more trend – a dollar bear trend, that is – and less volatility.   To challenge the dollar, currencies will need a lot of protection A typical financial market response to the start of a Federal Reserve easing cycle would be a bullish steepening of the US yield curve on the prospect of reflationary policy coming through. To speak of ‘reflationary’ policy right now seems criminal – but the Fed has a dual mandate, and if inflation is coming under control through 2024 it can cut rates to ameliorate the impact on the labour force. Bullish steepening of the US yield curve normally favours the commodity currencies, and that's our conviction call in the G10 space. As outlined in our Behavioural Equilibrium Exchange Rate (BEER) model below, the commodity currencies are the most undervalued in the G10 space. Their extreme undervaluation provides some much-needed protection against any continuing dollar strength. Notably, the euro and sterling do not have such protection. Looking across the currency blocs then – after relatively range-bound trading into year-end – we expect the dollar bear trend to pick up a little pace into the second quarter of 2024 as the short-end of the US curve starts to come substantially lower. European FX should be lifted, but stagnant eurozone growth and the risk that the European Central Bank cuts too early suggest that EUR/USD does not lead this rally. Neither does GBP/USD, given our mildly bullish view on EUR/GBP and 100bp of Bank of England easing. Having outperformed this year, we expect the Swiss franc to be flat against the euro in 2024 as the Swiss National Bank seeks more stability than strength in the nominal trade-weighted franc. Better positioned in Europe we think (and conditioned on a lower interest rate environment) are the Scandi currencies. Both the Norwegian krone and the Swedish krona are undervalued – the krone more so. Both central banks would prefer stronger currencies and the krone probably has a better chance of a recovery in 2024 given a stronger economy and its more severe undervaluation after the rally in energy prices.  
Bowim's 4Q23 Outlook: Navigating Short-Term Challenges, Poised for Long-Term Growth

The Swiss National Bank Adopts a Slightly More Dovish Tone Without Imminent Rate Cuts

ING Economics ING Economics 14.12.2023 14:13
The Swiss National Bank appears slightly more dovish The SNB kept its key rate unchanged at 1.75%, as expected. Its message is slightly more dovish, but it doesn’t mean rate cuts are imminent.   A slightly more dovish message As expected, the Swiss national bank decided to keep its key rate unchanged at 1.75% at its December meeting, its level since June 2023. The SNB's communication is more dovish, indicating that they are clearly not considering any further rate hikes. Against a backdrop where consumer price inflation stood at 1.4% in Switzerland in November, the 6th consecutive month below 2%, this is not surprising. But the SNB is going a little further than that. First, it has revised its inflation forecasts downwards. It is now forecasting average inflation of 2.1% in 2023, 1.9% in 2024 and 1.6% in 2025, compared with 2.2%, 2.2% and 1.9%, respectively, at its previous meeting. The SNB is still expecting inflation to rebound in the coming months on the back of higher energy prices, rents and VAT. Nevertheless, it acknowledges that inflation has been weaker than expected in recent months and that "In the medium term, reduced inflationary pressure from abroad and somewhat weaker second-round effects are resulting in a downward revision". The inflation forecasts for the entire period are, therefore, within the price stability range, defined by the SNB as being between 0 and 2% inflation. According to the SNB, the balance of risks for inflation forecasts is also well balanced, with the risks of an upside surprise being as great as those of a downside surprise. In addition, although it still states that it is "willing to be active in the foreign exchange market as necessary", it no longer explains how. In recent quarters, the SNB has been buying Swiss francs to reinforce its appreciation, which has had the effect of reducing imported inflation but has also worsened the competitiveness of domestic exporters. The SNB no longer seems to favour the idea of an even stronger Swiss franc and could now start selling the currency again, which would support exports and, therefore, economic growth in Switzerland. This is a major change for the SNB.   But rate cuts are not just around the corner The message is, therefore, slightly more dovish. However, there is nothing to suggest that rate cuts will be forthcoming soon. Firstly, the SNB's target is asymmetrical, as it wants to achieve inflation of between 0 and 2%. Today's inflation forecasts fall squarely within this target, and the SNB expects inflation to be at 2% in the second and third quarters of 2024. These inflation forecasts offer little argument for an imminent rate cut. In addition, the SNB has a tool to steer monetary policy other than its policy rate: its interventions on the foreign exchange markets. It is likely to use this instrument first and start selling Swiss francs before considering rate cuts. It confirmed this between the lines during the press conference. Finally, the SNB's key rate is at 1.75%, a fairly unrestrictive level close to the level of expected inflation. Past interest rate rises are, therefore, much less damaging to the economy than they are in the United States and the Eurozone.   Against this backdrop, the SNB is likely to take a much longer pause than the Fed and the ECB. Rate cuts will probably come, but much later than the other central banks. At this stage, we are expecting the first rate cut to come in December 2024, compared with the first rate cuts expected in the first half of the year for the Fed and the ECB. Moreover, the scale of the rate cuts is likely to be much smaller than elsewhere. Total rate cuts in 2024 and 2025 could be in the region of 50bp or even a maximum of 75bp in Switzerland.   FX: SNB no longer focusing on FX sales The SNB confirmed today that it is no longer focusing on FX sales. This is consistent with our EUR/CHF update in our 2024 FX Outlook published last month and supports our view that EUR/CHF can remain stable near 0.95/0.96 next year. 
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Yen Slips as Economic Data Disappoints, SNB's Dovish Stance Challenges Franc's Gains

Enrique Díaz-Álvarez Enrique Díaz-Álvarez 16.01.2024 14:48
A disappointing set of domestic economic data sent the yen lower against the dollar once again last week, with the Japanese currency opening trading this week around the 145 level. Expectations for the first Bank of Japan interest rate hike have continued to be pushed further into the future amid signs of an easing in wage pressure and a drop in inflation. Last week’s earnings data for November was a massive miss, with wages growing by only 0.2% year-on-year, the lowest rate since December 2021 and well below the +1.5% consensus. Bank of Japan officials have placed heavy emphasis on earnings data in recent communications. The upcoming annual ‘Shuntō’ salary negotiations, which conclude in March, will be key in determining the timing of the first hike. As things stand, a strong wage negotiation will likely be needed to convince investors that tightening will commence soon, with swaps now assigning only around a one-in-three chance of a first move in April. National inflation data will be the focus this week, with the December data due on Thursday.   CHF We recently said that it might be difficult for the franc to hold onto its gains and, indeed, the currency sold off last week and was among the worst performers among the G10 currencies. We continue to view the franc as expensive, and believe that more weakness could be in store in the coming quarters, particularly should the Swiss National Bank begin to shift its attention towards supporting the country’s growth outlook. We don’t view the recent uptick in inflation as something that could potentially prevent the SNB from delivering a dovish pivot, particularly as both measures of inflation remain firmly within target. The focus this week should be on external news, although Thursday's speech by SNB President Jordan in Davos will also be worth following.
German Ifo Index Hits Lowest Level Since 2020 Amidst New Economic Challenges

Bank of Japan Signals Potential End to Negative Rates, June Hike on the Horizon

ING Economics ING Economics 25.01.2024 13:15
Bank of Japan opens the door to ending negative rates, but timing uncertainty remains The Bank of Japan stood pat on monetary policy today as widely expected. But the market is now paying attention to a more positive tone on the wage and inflation outlook, as well as an upgrade to the FY2024 inflation outlook which lays the groundwork for policy normalisation. We still see a slightly higher chance of a first hike taking place in June than in April.   No surprise that the BoJ kept its policy rate and 10-year yield target unchanged We think the Bank of Japan's modest change in its view on inflation hints that policy normalisation is approaching. The BoJ assessed its statement that the likelihood of achieving the price goal has “continued to gradually rise.” Governor Kazuo Ueda’s comments on wages and inflation were also more positive than in previous meetings, signalling that a path to policy normalisation could be underway. Markets were likely pleased to hear that the central bank would consider whether negative rates should remain if the price goal is in sight and that it can make policy decisions without all small firm wage data.   Quarterly outlook report Aside from the policy decision itself, the BoJ’s quarterly outlook report was closely watched by market participants. As we expected, the BoJ lowered its core inflation outlook for FY 2024 from 2.8% to 2.4% while upgrading the outlook for FY 2025 from 1.7% to 1.8%. The government's efforts to curb inflation and the recent weaker-than-expected global commodity prices will likely drag down the price for early 2024, but the BoJ still sees underlying inflation pressures remaining through FY 2025, induced by solid wage growth. This tells us that a rate hike is only a matter of time – but with the BoJ reconfirming its patient easing stance, the timing remains uncertain.     BoJ outlook Market bets on an April rate hike increased sharply after today’s decision, but for now, we retain our long-standing view of the first rate hike materialising in June. Of course, this could change depending on upcoming inflation trends and growth conditions. There was no change in the forward guidance from today’s statement, and we don’t think the BoJ will deliver any policy changes at its next meeting in March. We also don't expect it to make any noise by delivering a surprise policy change at the end of the fiscal year. Governor Ueda has stated that more information will be available ahead of the April meeting than in March, so we're inclined to think that the latter is probably off the table. There are several areas to follow to gauge the precise timing of the BoJ’s policy change, but inflation should be considered the most important of them all. In our view, the inflation path up until April will be quite bumpy, exacerbated by the government’s energy subsidy programmes. Consumer inflation has slowed over the past two months as the government renewed some of the subsidy programmes from last November, combined with softening oil prices. We expect inflation to move even lower in January (vs 2.2% in December) but pick up quite sharply again in February. April CPI is a key piece of data for judging the inflation trend, but by the time the April meeting is held, the nationwide CPI report won't yet be available. April is also in the middle of the wage-negotiating Shunto season. While Governor Ueda mentioned that there isn't any need to wait to gather all data from small firms, we belive that the BoJ will wait a couple of more months to see if the wage growth could actually lead to sustain inflationary pressure – particularly in service prices. The BoJ will take orderly steps, including forward guidance being revised before any action is taken. We think that this revision will likely happen in April. Taking these factors into consideration, we still expect the Bank of Japan to announce its first rate hike in June for now.     Choppy inflation is expected at least for 1Q24   FX: Not hawkish enough USD/JPY held pretty steady after the release of the BoJ decision but dropped around 0.7% as Governor Ueda hinted that wages and prices were heading in the direction of price stability. The same thing occurred in the JGB market, with 10-year JGB yields edging about 3-4bps higher around the same time as USD/JPY sold off. As above, market expectations of a shift in BoJ policy will now roll on to the 26 April meeting, when the next set of CPI forecasts will be released. Today’s price action, where the yen is now handing back its short-term gains, suggests the market will be happy to park the BoJ policy normalisation story until April. Given further upside risks to US rates over the next month – including the risk of higher Treasury yields next week, should the US quarterly refunding announcement shine a light on the US fiscal deficit – USD/JPY can probably continue to trade around this 147/148 area. And BoJ intervention remains a threat should USD/JPY trade over 150 again. We currently have USD/JPY forecasts at 140 for the end of March and 135 for the end of June. We certainly like that direction of travel – particularly if the short-end of the US curve starts to break lower ahead of the first Fed hike, which we forecast in May. The risk is that mixed market sentiment and low volatility keep interest in the carry trade and keep the yen softer than our end-of-first quarter target. However, we suspect carry trade investors will be increasingly turning to the Swiss franc as their preferred funding currency. The Swiss National Bank wants a weaker currency and may be the first to ease. The BoJ wants a stronger currency and will now be the only G10 central bank to hike.   

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