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Jan 08 - 02:55 PM

Danske: Positive on CHF Amid Narrowing Rate Differentials and Strong Fundamentals

By eFXdata  —  Jan 08 - 12:30 PM

Synopsis:

Danske maintains a positive outlook on the Swiss franc (CHF) as narrowing rate differentials to the ECB and strong fundamentals support the currency, while the SNB remains inactive on FX intervention.

Key Points:

  1. Swiss Inflation in Line with Expectations:

    • December inflation data met the SNB's Q4 2024 forecast at 0.7% y/y.
    • Headline inflation came in at 0.6% y/y (consensus: 0.6%), and core inflation at 0.7% y/y (consensus: 0.8%).
    • Seasonally adjusted monthly momentum showed further disinflation, with headline at 0.07% and core at 0.05%.
  2. Implications for SNB Policy:

    • The disinflationary trend supports expectations for another rate cut in March.
    • Two more inflation prints will be available before the SNB's next meeting on 20 March.
  3. CHF Outlook:

    • Danske sees continued CHF strength due to narrowing rate differentials with the ECB and strong economic fundamentals.
    • The SNB's absence from FX intervention bolsters CHF's performance.

Conclusion:

Danske remains positive on the CHF, driven by favorable rate dynamics and fundamentals. While another SNB rate cut is expected, the currency's position is supported by limited intervention and robust economic trends.

Source:
Danske Research/Market Commentary

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