Scan to Download iOS&Android APP
By Adrian Holliday
11:50, 11 October 2022
USD/CHF has bust parity again as Ukraine counts the cost of 80 cruise missiles striking its territory on Monday, including key infrastructure targets, as well as civilians following Sunday’s Crimean bridge attack. The count continues – more Russian strikes hit today.
Sentiment, at the margins, is still being pressured by the Swiss National Bank rate move last month of 75 points, not 100 as some investors had hoped. A speech from Swiss National Bank (SNB) chairman Thomas Jordan shortly should supply markets with more direction.
Viraj Patel from Vanda Research wants clarity. “I was very confused with the messaging from the SNB a couple of weeks ago [when the SNB raised interest rates by 75 basis points]. I wasn’t too sure if they were too scared of Swiss franc strength.
“My take [now] is that they’re getting to a point where they are comfortable with the strength and do what it needs to do – take the edge off inflation.”
Bullish Bearish
64% 36%
You voted bullish.
You voted bearish.
Give USD/CHF a try
In the past the SNB has referenced two-way risk. “They might start selling their treasury holdings which would be a pretty big shift,” adds Patel. Especially given the SNB’s size. The flows could be immense.
Trying to tighten via two channels is tricky, be it via fx or rate hikes. Either way, should you be holding CHF in a crisis environment?
Currently the Swiss National Bank’s inflation target is between zero and 2%. Due to the strength of its franc it wields considerable inflation protection. Annual inflation rate dipped 3.3% in September, down on August’s 3.5% peak, the highest figure in almost 30 years.
But this is still way above the Swiss comfort zone, well above the Swiss National Bank’s 0-2% target range. Core inflation at 2% is still steady though.
USD/JPY
AUD/USD
GBP/USD
GBP/JPY
The SNB has erred towards a zero-interest rate program to rein in the franc – the purpose of SNB interventions also – rather than encourage growth, but it’s what Jordan will do now that matters.
CHF has been a robust performer against the yen and sterling this year but the upwards thrust been driven its decision to hike rates from -0.75% to -0.25% in June which took investors by surprise.
All eyes, then, on Jordan later – is the priority inflation or containing the franc? The mood music suggests the former.
Euro moves this morning were relatively subdued Germany giving a support package to fund measures against the energy crisis.
“Gas prices continue to ease off, but we’re not seeing that reflected as a positive price action on the euro,” said Equals Money market strategist Thanim Islam. “Bigger themes continue to dominate, primarily ongoing concerns that the euro will fall into a recession later this year.”
While the ECB’s Philip Lane and Francois Villeroy speak later the main event is Thursday’s US inflation figures “and whether the data continues to point that the Fed need to remain on its rate hike cycle”.
A little before lunch DXY was down 0.25% at 112.73 while GBP/USD was 0.34% higher at 1.1096; EUR/USD was 0.31% higher at 0.9734.
Rate this article
Rate this article:
Share this article
Comment
Rate this article
Rate this article:
Share this article
There are currently no responses for this story.
Be the first to respond.
Most traded
Most traded
Most traded
Most traded
Most traded
Most traded
Join the 455.000+ traders worldwide that chose to trade with Capital.com
Also you can contact us: call +44 20 8089 7893 • support@capital.com
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81.40% 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. Risk Disclosure Statement
The value of shares and ETFs bought through a share dealing account can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.
Risk warning: сonducting operations with non-deliverable over-the-counter instruments are a risky activity and can bring not only profit but also losses. The size of the potential loss is limited to the funds held by us for and on your behalf, in relation to your trading account. Past profits do not guarantee future profits. Use the training services of our company to understand the risks before you start operations.
Capital Com SV Investments Limited is regulated by Cyprus Securities and Exchange Commission (CySEC) under license number 319/17. Capital Com SV Investments Limited, company Registration Number: 354252, registered address: 28 Octovriou 237, Lophitis Business Center II, 6th floor, 3035, Limassol, Cyprus.
Start trading on USD/CHF now.