UBS predicts rise in EUR/CHF and also say that USD buying looks stretched

<p>Via UBS on the CHF, EUR and USD.</p><p>Firstly, on EUR/CHF:</p><ul><li>
UBS forecast EURCHF will trade in a 0.95 to 1.00 range, despite it being just under 0.95 as of the date of the note</li><li>its end Q1 forecast is 0.97</li></ul><p>EURCHF has rebounded from under 0.93 late in 2023 and into the beginning of the year. UBS says that drop was due to</p><ul><li>investors reducing EUR exposure and jumping into CHF safety over the thinly traded holiday period</li><li>major
central banks signalling openness to rate cuts at the margin, meaning a reduced yield advantage for EUR and USD</li><li>steady fall in EURCHF last year was SNB policy promoting CHF strength, appreciation of the Swissy helped reduce imported inflation </li></ul><p>Looking ahead (see forecasts above) expect EURCHF to rise in response to European Central Bank
policy:</p><ul><li>ECB likely to only slowly respond to falling
inflation, resulting in a rise in real rates in the eurozone, thus supporting EUR</li></ul><p>UBS caveat this with the warning that the EUR to be supported this way as long as the EZ doesn't all into recession</p><p>UBS point out two policy shifts from the Swiss National Bank in recent months:</p><ul><li>In December the Bank said potential forex market interventions can be
two-sided, the SNB is no longer solely focused on selling foreign currencies</li><li>SNB President Jordan said in an interview at
the World Economic Forum meeting in Davos earlier this month that Switzerland's
inflation has become less of a concern, and his concerns now centred on the strong CHF's negative impact on business.</li></ul><p>***</p><p>Also, separately, on the USD, analysts at the bank say:</p><ul><li>USD buying looks very stretched</li><li>
Hedge funds have purchased 3.2 standard deviations of USD over the past two weeks</li><li>EUR/USD could see a rebound if PMI data shows improvement</li></ul>

This article was written by Eamonn Sheridan at

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