USD/CHF: Building inflation concerns pose some upside risks for the Swiss franc – MUFG


Analysts at MUFG Bank, point out the Swiss franc has recently started to strengthen alongside the price of gold. They argue the move is driven more by building concerns over higher inflation rather than safe-haven demand.

Key Quotes:

“The re-strengthening of the CHF in recent months has cast some doubt on expectations that it should continue to weaken as the global and European economies recover from the negative COVID shock. Our own year-end forecasts for EUR/CHF and USD/CHF have been set at 1.1250 and 0.9220 respectively. The recent rebound for the CHF has coincided with a rebound in the price of gold which has climbed from a low of USD1,667/ounze in March to USD1,876/ounze. The correlation between daily % changes in USD/CHF and the price of gold has re-strengthened to -0.38 over the past month but still remains well below levels at the end of last year when it reached a peak of -0.81 in November.”

“The rebound in both the CHF and gold appears to be driven more by building concerns over higher inflation rather than a pick-up in demand for safe havens.”

“Looking back over the last fifty years, it is clear that the CHF has been a better long-term store of value than the USD and EUR. The CHF has strengthened by almost over 200% against our equally-weighted basket of USD and EUR since 1975. The CHF outperformed in the run up to sustained periods of higher and rising US inflation back in the late 1970’s and late 1980’s. The CHF’s recent performance has been more mixed though. The CHF traded on a softer footing during the period of higher US inflation in the early 2000’s, although it was then followed by the CHF strengthening ahead of the next period of higher inflation between 2004 and 2006.”

“Further evidence of building inflationary pressure could provide a more supportive backdrop for the CHF. It poses upside risks to our forecast for the CHF to weaken modestly as the global economy continues to recover from the COVID shock.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD slides to 1.0650 amid strong USD, dovish ECB commentary

EUR/USD slides to 1.0650 amid strong USD, dovish ECB commentary

EUR/USD is falling further to test 1.0650 after dovish commentary from the ECB policymaker Stournaras weighed on the Euro. Divergent ECB-Fed policy outlooks keep the US Dollar strongly bid ahead of the US sentiment data and Fedspeak. 

EUR/USD News

GBP/USD extends decline below 1.2500 on sustained USD strength

GBP/USD extends decline below 1.2500 on sustained USD strength

GBP/USD extends losses below 1.2500, struggling even after the January month UK GDP was revised higher to 0.3% while the UK industrial sector showed robust growth. Resurgent US Dollar demand and geopolitical tensions keep the pair undermined. 

GBP/USD News

Gold price taps on $2,400 for the first time on record

Gold price taps on $2,400 for the first time on record

Gold price tests $2,400 for the first time on record, scaling new lifetime highs amid persistent geopolitical tensions. The upsurge seems unaffected by reduced Fed rate cut bets and bullish USD. Extremely overbought conditions might prompt some profit-taking around the metal.

 

Gold News

Robert Kiyosaki steers clear from ETFs, opts for holding Bitcoin directly instead

Robert Kiyosaki steers clear from ETFs, opts for holding Bitcoin directly instead

Rich Dad Poor Dad author Robert Kiyosaki says he will not buy Bitcoin ETFs. Kiyosaki stated his dislike for Wall Street’s financial products and preferred packaging his own. 

Read more

US banks in focus, as earnings season gets underway

US banks in focus, as earnings season gets underway

Today sees the big banks kick off earnings season in the US, with JP Morgan Chase, Wells Fargo, Blackrock, Citigroup, and State Street all reporting before the bell.

Read more

Forex MAJORS

Cryptocurrencies

Signatures