Synopsis:

Nomura is increasing its conviction on a short CHF/JPY position, targeting a level of 163 by the end of October. The decision is influenced by Switzerland's disinflationary pressures and recent economic data, despite the resilient EUR/CHF pair. The firm’s strategy reflects a divergence in monetary and FX policies and aims to balance safe-haven demand.

Key Points:

• Disinflationary Pressures in Switzerland:

  • Softer-than-expected CPI inflation has not significantly boosted EUR/CHF, which remains stable around 0.94.
  • Headline CPI in Switzerland has fallen below June forecasts, driven by deflation in goods prices. The strengthening CHF is partly to blame, prompting potential SNB FX intervention.

• CHF/JPY Trade Rationale:

  • Nomura views the risk of a US economic slowdown as a factor to consider while shorting CHF. They are focusing on CHF/JPY due to the divergence in monetary and FX policies.
  • The firm is targeting a CHF/JPY level of 163 by end-October and has raised their conviction on this trade from 3/5 to 4/5.

Conclusion:

Nomura's increased conviction in their short CHF/JPY position reflects concerns about Switzerland's disinflationary trends and a strategic response to policy divergences. The target of 163 by the end of October is set to capitalize on the expected FX and monetary policy dynamics.