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Jun 05 - 06:55 PM

Barclays Assessment: Bearish Outlook on CHF Unchanged; Here is Why?

By eFXdata  —  Jun 05 - 03:00 PM

Synopsis:

Barclays reaffirms its bearish stance on the Swiss Franc (CHF), despite recent comments perceived as hawkish by SNB President Thomas Jordan. The analysis focuses on the underlying economic indicators and market expectations that support a continued bearish view.

Key Points:

  1. Interpretation of SNB President's Speech: Barclays interprets SNB President Jordan's recent remarks not as signaling a shift in policy stance but as a retrospective justification for the March rate cut, suggesting no significant change in the central bank's outlook.

  2. Inflationary FX Risks Are Contained: Despite Jordan's comments on potential inflationary risks from a weaker franc, the CHF has depreciated only modestly since November 2023. This slight decline has not yet resulted in significant inflationary pressures.

  3. Comparative Economic Performance: Economic indicators in Switzerland continue to underperform relative to the Eurozone, undermining potential support for the CHF.

  4. Market Pricing and Policy Expectations: The market has not priced in further rate cuts, indicating a skepticism about the likelihood of more aggressive monetary easing by the SNB.

Conclusion:

Barclays maintains a bearish outlook on the CHF, supported by the SNB's retrospective communication, mild currency depreciation without significant inflationary impact, weaker economic performance compared to the Eurozone, and market expectations that discount further rate cuts. This alignment of factors suggests that the CHF may continue to face downward pressure.

Source:
Barclays Research/Market Commentary

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