Swiss franc stays strong
By Peter Rosenstreich
Although the Euro has rallied against the CHF, the Swiss National Bank will not tighten rates ahead of the European Central Bank. The SNB’s first hike would be well into 2019, indicating that current pricing is too optimistic.
For now, the SNB is happy to ride with the markets. Macro and domestic conditions are in a sweet spot: shorting the CHF is an analyst-favourite for 2018, while growth outlook has improved thanks to a weaker franc. Still, inflation is nowhere near the SNB target. So the SNB will remain on the sidelines, keeping rates unchanged and reiterating its pledge to intervene in forex markets as needed.
Greenback rising
By Arnaud Masset
A 0.25% hike in the US prime rate is expected later today, and all ears will be listening indications of when the US Federal Reserve will raise rates again in 2018. The market is expecting at least two rate hikes next year, if not three. Also released today will be November’s consumer price index: expectations are for a 2.2% annual gain, up from 2% in October. An upside surprise is probable, especially as energy prices are gaining.
The good news is propelling the dollar. It surged across the board yesterday, lost steam in the Asian session today, but has resumed a climb on the whiff of building inflation.