Basic Weekly Forecast for the Swiss Franc: Change of Course After the SNB -by Ecork

Fundamental Outlook for the Swiss Franc: Neutral

  • The Swiss Franc may be the most attractive safe haven after the Swiss National Bank raised interest rates for the first time in 15 years.
  • Fears of a recovery in the eurozone debt crisis may continue to boost inflows into the Swiss franc through EUR/CHF prices.
  • according to the is IG Customer Confidence IndexThe Swiss Franc he have rising prejudice.

Swiss Franc Week Review

The Swiss Franc was the top performing major currency last week, gaining ground against each of its major peers after the Swiss National Bank shocked market participants with its first rate hike in 15 years. The rate hike, from -0.75% to -0.25%, marks the first step in the SNB’s key rate since 2015.

With risk appetite eroding again amid fears of a growing global recession, the Swiss franc posted its strongest performance against commodity currencies: AUD/CHF fell -3.22%; The Canadian dollar / Swiss franc fell along with oil prices, down -3.61%. The NZD/CHF was down -2.42%. CHF/JPY rates also performed well, as the divergence between the Swiss National Bank and the Bank of Japan grew more broadly: the pair added +2.23%. After rounding off the major currencies, EUR/CHF fell -2.01%, GBP/CHF fell -2.57%, and USD/CHF fell to -1.80%, despite the Federal Reserve raising interest rates by 75 basis points for the first time since 1994.

lighter swiss economic calendar

After the Swiss Central Bank’s surprise rate hike, the economic calendar is notably brightened in the coming days for the Swiss Franc. In fact, there are only two events on the Swiss economic calendar next week, leaving the Swiss Franc at the whims of broader risk trends as well as news flowing around concerns about the eurozone debt crisis.

  • On Tuesday, Swiss trade balance data for May is due at 6 GMT.
  • On Thursday, Swiss 1Q’22 current account data will be released at 7 GMT.

completely Swiss Economic data outlook, view file DailyFX Economic Calendar.

Swiss government bond yield curve (1 to 30 years) (June 2020 to June 2022) (Chart 1)

Basic Weekly Forecast for the Swiss Franc: Change of Course After the SNB

The sharp rise in Swiss inflationary pressures in recent months – now at +2.9% y/y in May, well above the SNB’s 0 to +2% target – has provided a tailwind to Swiss government bond yields. With the Swiss central bank reacting in turn, Swiss government bond yields are now at their highest since 2014.

While still relatively low compared to other major economies, a rise in Swiss yields should increase the relative attractiveness of the Swiss franc compared to other safe haven currencies such as the Japanese yen. Moreover, a rise in Swiss yields may help boost the franc as the echoes of the eurozone debt crisis resonate – so much so that the European Central Bank was forced to hold an emergency meeting last Wednesday, less than a week after the June policy meeting.

Locating Swiss Franc CFTC Futures (June 2020 to June 2022) (Chart 2)

Basic Weekly Forecast for the Swiss Franc: Change of Course After the SNB

Finally, consider positioning, according to the CFTC’s COT for the week ending May 24, speculators Their net short positions in the Swiss franc fell to 6,488 coverturned of 15,850 contracts. It is noteworthy that the positioning reporting period ended two days before the SNB rate decision; A further decline in net short positions is expected in the future.

— Written by Christopher Vecchio, Chartered Financial Analyst, Chief Strategist

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