USD & CHF: An Interesting Trade

Initially, the positive NFP gains gained attention, but this was quickly dampened by the first decline in household employment this year and a higher US unemployment rate, reaching a one-year high.

USD: Pay no mind

Friday's US jobs report has left the short-term fate of the USD uncertain (as discussed on this blog; https://acy.com.au/en/market-news/market-analysis/mixed-messages-on-us-jobs-l-s-130552/). Initially, the positive NFP gains gained attention, but this was quickly dampened by the first decline in household employment this year and a higher US unemployment rate, reaching a one-year high. Additionally, there was only a slight decrease in average earnings, maintaining the overall downward trend in wage growth. These developments have left the market speculating about the Federal Reserve's next steps, especially considering the blackout period and the limited macroeconomic agenda this week, which provide little guidance. If the ISM services survey and factory orders negative we can expected a calm down on US markets and a ask USD. While the focus may be on the prices paid component of the ISM survey, and whether it continues to cool, a significant shift will likely be necessary to sway market expectations regarding the Fed's future actions. Unless such a shift occurs, the USD could potentially experience consolidation leading up to next week's meeting.

CHF: No getting deflated

After displaying resilience throughout May, the CHF has taken a pause, with EUR/CHF retracing a significant portion from its multi-month lows of 0.9675. The focus of domestic news has been on policymakers emphasizing that further tightening cannot be disregarded, as they are unwilling to tolerate prolonged core inflation above 2%. Last month, both headline and core CPI figures surprised on the downside, and economists surveyed by Bloomberg anticipate a continuation of this deceleration in May. If the headline and core CPI align with the consensus expectations of 2.2% and 2.0% year-on-year (YoY) respectively, recent developments may lead to the Swiss National Bank (SNB) opting for a more moderate tightening approach, with a 25 basis points (bp) rate hike in June instead of a larger 50bp move. However, ruling out further rate hikes entirely is unlikely at this stage. Overall, the CHF stands on relatively equal footing with other European currencies in terms of the remaining tightening required, while still maintaining a more favourable position in terms of short real rates. Against this backdrop, I maintain a positive outlook on the CHF in the coming months.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Regulation: ASIC (Australia), VFSC (Vanuatu)
read more
Is the Glamour of CHF Fading Away? Bearish CHF!

Is the Glamour of CHF Fading Away? Bearish CHF!

The CHF's Mardi Gras celebrations are devoid of any late indulgence, as its February losses have deepened due to the unexpected downturn in the Swiss CPI data. Credit Agricole longstanding warning about the CHF's robust start to 2024, coupled with the SNB's altered stance on FX interventions in December, has manifested in the currency's struggles.
ACY Securities | 152 days ago
EUR & CHF – EUR Set to Go Further Down to 1.04

EUR & CHF – EUR Set to Go Further Down to 1.04

The EUR/USD pair has bounced back from its recent low of 1.0450, but it could struggle to find enough buyers as it approaches the 1.0530/1.0550 range. The US dollar remains an unattractive sell, and there is currently no compelling narrative in the eurozone to counter the exceptionalism story in the United States.
ACY Securities | 284 days ago
Dollar Drops on the Disinflation Trade – Keep Selling?

Dollar Drops on the Disinflation Trade – Keep Selling?

The downside surprise in US June CPI inflation has seen the dollar drop to new lows for the year. Over recent months I had been speculating that clear signs of US disinflation - and a weaker dollar - may emerge in 3Q23 and yesterday's moves could well be the start of an important market adjustment. 
ACY Securities | 368 days ago
Is it time to buy EURUSD?

Is it time to buy EURUSD?

Late cycle dollar strength meets the carry trade. I see two key themes driving FX markets in the near term. The first is central banks continuing to battle inflation, yield curves staying inverted, and the dollar continuing to hold gains. The second is cross-market volatility continuing to sink - generating greater interest in the carry trade. Expect these trends to hold into Fed, ECB and BoJ meet
ACY Securities | 403 days ago
Possible Scenarios for End of This Month

Possible Scenarios for End of This Month

In April, the dollar underwent a slower correction compared to March. In response to persistent inflation, the Federal Reserve raised its key rates by 25 basis points to 5.00%-5.25% at the start of May.
ACY Securities | 427 days ago