By eFXdata — Oct 25 - 11:00 AM
Synopsis:
SocGen notes that USD/CHF has not kept pace with recent increases in short rates differentials, trading below where it should be based on historical correlations.
Key Points:
- Over the past year, USD/CHF has closely followed short rates differentials, but it now lags, with expected trading at 0.88 versus the current 0.86.
- Both USD and EUR short rates have increased, while CHF rates have decreased, affecting the EUR/CHF pair similarly; however, the correlation is stronger with USD/CHF.
- While the Swiss franc (CHF) remains robust, the lag in USD/CHF suggests limited gains for the currency.
Conclusion:
The current dynamics indicate that USD/CHF's performance is not fully reflective of the underlying rates differentials, potentially limiting CHF's upside against the USD.
Source:
Société Générale Research/Market Commentary