MUFG Bank analystspoint out that fears of a hard landing and a Swiss National Bank (SNB) of aggressive line favor a higher performance of the Swiss franc. According to them, the Swiss should continue to benefit from the SNB’s desire to cushion upside inflation risks, both through faster rate hikes and tolerating a stronger currency.
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“CHF has been the best performing G10 currency so far this month, as it has strengthened strongly against both the EUR (+2.2%) and USD (+1.5%). It has regained momentum bullish against our equally weighted basket of other G10 currencies after a period of consolidation at higher levels between July and August The CHF’s renewed bullish momentum has once again coincided with a sharp revaluation in SNB rate hike expectations, similar to June.”
“Market participants are increasingly confident that the SNB will continue to play catch-up with major central banks and offer a further 100bps hike in the coming week (Thursday) to combat upside inflation risks.” hikes are currently priced at 86 basis points The SNB has also become more tolerant of currency strength since its last policy meeting in June as it provides another channel to help cushion inflation risks upward”.
“CHF looks well positioned to extend its recent advance, especially against other high-beta G10 currencies.”
Source: Fx Street
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