Swissquote Bank’s market analysts, Yann Quelenn and Arnaud Masset:
Yann Quelenn: “We believe that the SNB are poised to react in the event that the Swissie strengthens lower than 1.0700 CHF for one euro. As the EURCHF is pushed downside, the Swiss central bank now finds itself in a difficult situation. For the time being, the SNB still has some time to react as the ECB will only officially announce its adjustments to its QE programme at its December meeting.
A new peg is a distinct possibility. The SNB has a massive battle ahead against the backdrop of a massive ECB QE and mounting European uncertainties that are bringing capital back to safe haven Switzerland. A peg could be a good compromise as rates are already too low. Decreasing rates again would only serve to punish CHF investors for the ECB monetary policy decisions.”
Arnaud Masset: “After a sharp appreciation of the US dollar against the loonie, the Canadian dollar regains ground as crude oil prices stabilise. However, we believe that this recent correction will be short-lived as the fundamentals of the Canadian economy are lacking the strength to reverse the current trend. Unemployment reached 7.1% in September, while wholesale trade and retail sales continue to show signs of weakness. Today’s inflation figures will demonstrate that crude oil prices continue to weigh on the headline CPI, which is expected to decrease to 1.1%y/y - below BoC’s target of 2% but still within the target range of +/-1% - from 1.3% in the previous month. On the other hand, the core gauge is expected to increase to 2.2%y/y from 2.1% in August.
All in all, we believe that the risk remains on the downside for loonie as we expect a more accommodative stance from the BoC in spite of a relatively hawkish message at its last meeting. Moreover, dollar bulls are patiently sitting on the sidelines for now, waiting for the rate hike talks to resume. We believe $1.32 to be a decent target given the overall situation.”