Focus FX Currency Forecast

9 Martie 2010

RAIFFEISEN BANK S.A.

 

EUR/CHF

For several weeks now, almost the only factor influencing EUR/ CHF has been the monetary policy of the Swiss National Bank (SNB). Accordingly, this week promises to be very interesting, as the SNB will be holding its quarterly meeting to assess the monetary policy situation. Since December, the SNB has intervened on numerous occasions when the franc has appreciated significantly. These interventions, however, have been marked by smaller volumes than those undertaken in 2009. Consequently, the resulting change in the exchange rate has been short-lived and disappeared again after just a few hours. This cautious, tentative approach can be seen as a sign that the SNB no longer wishes to actively weaken the franc. Up to now, the interventions on the currency market have been cut back, but not done away with altogether, in case economic activity begins to falter again.

In its last assessment of the monetary policy situation in December 2009, the SNB stuck with its conservative approach and did not forecast major gains or losses in GDP going forward. The latest increases in Swiss leading indicators, however, are now putting some pressure on their forecasts. Although we still expect to see economic activity to slow down around the middle of the year, this will probably not lead to the kind of slump envisioned in the SNB prognoses. As a result, the SNB will probably raise its forecasts on 11 March.

There may also be more loosening when it comes to the SNB's choice of words about currency market intervention. Indeed, the SNB may even decide to wind up its interventions completely.

Hence, the franc should remain strong. We take this opportunity to open up a short-term trading idea Sell EUR/CHF (i.e. buy francs): Current: 1.463; target: 1.45; stop: 1,47. The focus on a more restrictive monetary policy and the outlook for higher inflation may also lead to a rise in the currently low capital market yields. Accordingly, we open a Trading Idea on the 10-year CHF bond future: Buy CONF Future (June contract): Current: 137.5; Target: 135.6; stop: 138,7.

 

Trading Ideas

Note: This list contains only the strongest trading ideas for the markets that we cover. Therefore not every market forecast that implies a buy recommendation is also listed as a trading idea! Trading ideas may also differ from our quarterly forecasts. as the time horizon can be different. The time horizon of the trade is at least two weeks. But not more than 3 months.

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