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6 Nov 2015
CHF expected to depreciate in 2016 – BAML
FXStreet (Edinburgh) - According to BofA Merrill Lynch Global Research, the Swiss franc’s perspective for the next year points to further weakness vs. the euro and the greenback.
Key Quotes
“To say that CHF has been fallen off the radar over the past month would be an understatement”.
“In TWI terms, CHF is barely changed in October whilst it has fallen just over 1% versus G10 FX if one excludes the large NZD move. The improvement in risk markets has contributed to the stabilization in the currency. CHF has lost its idiosyncratic focus as the Greek crisis has faded from the markets memory”.
“We would, however take comfort in the fact that despite the marked spike financial volatility that the CHF has failed to push meaningfully higher. This perhaps reflects the fact that the source of the volatility was not “localized” and was much broader in its impact”.
“We remain bearish on the outlook for CHF in the coming months as the impact of negative interest rates will continue to weigh on the currency. The latest balance of payments data reveals that Swiss domestic investors were buyers of overseas assets. This is what will drive CHF weakness as opposed to the macro outlook”.
“Moreover, the SNB has stated that it will monitor the impact of any ECB announcement in December in formulating its own policy. Much will depend on whether there is a knock-on impact on EUR/CHF”.
“Our CHF forecasts are unchanged with our profile looking for modest appreciation in EUR/CHF heading into 2016. Our bullish USD view expects a more substantive move in USD/CHF over the same time horizon”.
Key Quotes
“To say that CHF has been fallen off the radar over the past month would be an understatement”.
“In TWI terms, CHF is barely changed in October whilst it has fallen just over 1% versus G10 FX if one excludes the large NZD move. The improvement in risk markets has contributed to the stabilization in the currency. CHF has lost its idiosyncratic focus as the Greek crisis has faded from the markets memory”.
“We would, however take comfort in the fact that despite the marked spike financial volatility that the CHF has failed to push meaningfully higher. This perhaps reflects the fact that the source of the volatility was not “localized” and was much broader in its impact”.
“We remain bearish on the outlook for CHF in the coming months as the impact of negative interest rates will continue to weigh on the currency. The latest balance of payments data reveals that Swiss domestic investors were buyers of overseas assets. This is what will drive CHF weakness as opposed to the macro outlook”.
“Moreover, the SNB has stated that it will monitor the impact of any ECB announcement in December in formulating its own policy. Much will depend on whether there is a knock-on impact on EUR/CHF”.
“Our CHF forecasts are unchanged with our profile looking for modest appreciation in EUR/CHF heading into 2016. Our bullish USD view expects a more substantive move in USD/CHF over the same time horizon”.