More unstable risk sentiment on the back of this week’s terrorist attacks in Brussels failed to trigger any sustainable franc upside. It still appears that the SNB’s stance with respect to direct currency intervention is keeping the currency’s safe haven appeal low.
Next week’s data releases such as retail sales, PMI and the KOF leading indicator are unlikely to have any meaningful impact on investors’ central bank monetary policy expectations. This is especially true as a still overvalued currency seems to keep monetary conditions too tight.
As a result of the above outlined conditions we believe that crosses such as CHF/JPY can continue to trend lower. Even if the BoJ may ultimately have to consider a more aggressive policy stance, more time is needed to evaluate the latest policy steps impact on the economy. This is especially true as the central bank’s negative interest rate policy has not been well received by markets.
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