Société Générale (SocGen) provides insights into seasonal currency trends, specifically regarding the EUR/USD pair and the Swiss Franc (CHF), and shares their expectations for these currencies in the near term.
EUR/USD December Performance:
- EUR/USD historically performs well in December, with a strong track record over the past 25 years. This trend continued in the recent December, marking it as a favorable period for the Euro.
January: Challenging Month for EUR/USD:
- Historically, January is the most challenging month for EUR/USD, contrasting with its Q4 performance. The Euro tends to underperform in January, relative to trends in rates and economic surprises.
EUR/USD Outlook for 2024:
- Despite January’s challenging nature, SocGen forecasts EUR/USD to reach 1.16 during 2024. However, they note this is a longer-term expectation, and current conditions may not favor immediate Euro strength.
Fading CHF Strength:
- SocGen recommends fading the strength of the Swiss Franc, particularly against the Norwegian Krone (NOK). This strategy is influenced by a slowing pace in foreign currency purchases and higher rates supporting NOK.
Norges Bank and SNB Dynamics:
- The Norges Bank could be slower than other central banks in cutting rates, which benefits NOK. The Swiss Franc's strong performance in December, its best since 2010, is noted as potentially concerning for the Swiss National Bank (SNB).
SocGen's analysis highlights the seasonal trends of EUR/USD, with January typically posing challenges for the Euro. Despite this, they maintain a positive outlook for the pair in 2024. Additionally, SocGen suggests a strategy to capitalize on the current dynamics between the CHF and NOK, considering the monetary policies of the Norges Bank and SNB. This perspective underscores the importance of understanding seasonal trends and central bank actions in currency market strategies.