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Jan 10 - 06:55 PM

HSBC: Skepticism on CHF Bearish Reversal in 2024

By eFXdata  —  Jan 10 - 03:00 PM

Synopsis:

HSBC evaluates the Swiss Franc's (CHF) potential reversal in 2024, considering recent market trends and economic indicators.

Key Insights:

  1. CHF Bearish Reversal Speculation:

    • Markets are contemplating a possible bearish reversal for the CHF in 2024, especially after its strong performance at the end of 2023.
  2. EUR-CHF Movement:

    • The EUR-CHF pair has shown slight increases, nearing near-term resistance around 0.9350, partly driven by the rise in the Swiss National Bank (SNB) FX reserves in December.
  3. SNB FX Reserves Data:

    • The increase in SNB FX reserves in December appears modest against the declining trend of the past two years. Valuation effects from the global bond market rally in December might have influenced the reserve levels.
  4. Inflation and SNB's Stance:

    • Despite inflation falling below the target, HSBC believes the SNB will remain cautious about a weak currency, which could undo progress in inflation control. Recent CPI data from December showed a slight uptick, suggesting the central bank should not be complacent.
  5. Eurozone's Economic Impact:

    • Ongoing economic challenges in the Eurozone could continue to support the CHF as a safe-haven currency.

Conclusion:

HSBC expresses skepticism about the market's anticipation of a bearish reversal for the CHF in 2024. The bank highlights several factors, including SNB’s foreign reserve trends, inflation dynamics, and Eurozone economic conditions, that might underpin a more stable or strong CHF. The analysis suggests that despite recent market movements, fundamental economic factors may not support a significant bearish shift in the CHF’s trajectory.

Source:
HSBC Research/Market Commentary

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