USD to rise versus CHF in the coming quarters - Wells Fargo

Analysts from Wells Fargo, expect the US dollar to rise against the Swiss franc on the back of monetary policy divergence.

ey Quotes:

“Data that were released today showed that real GDP in Switzerland edged up 0.1 percent (0.4 percent at an annualized rate) on a sequential basis in the first quarter, which was weaker than most analysts had expected. In some sense, the outturn was not as bad as the headline seems to suggest.”

“In addition, there are no inflationary pressures in the Swiss economy at present . Yes, the swoon in the overall consumer price index since late 2014 reflects, at least in part, the collapse in energy prices. In addition, the appreciation of the Swiss franc, which is up nearly 10 percent on a trade-weighted basis since the end of 2014, has also added downward pressure on the overall rate of inflation. That said, inflation in Switzerland likely would be higher if the rate of economic growth in that country were stronger.”

“Due to the mild case of deflation that has taken hold in Switzerland, the Swiss National Bank (SNB) has cut its policy rates into negative territory. Although growth should firm a bit this year and inflation edge back into positive territory, the SNB seems to be a long way from tightening policy. Consequently, our currency strategy team looks for the U.S. dollar to appreciate modestly against the Swiss franc in coming quarters as the Federal Reserve slowly raises its target range for the fed funds rate.”