CHF finally weakensBy Vincent-Frédéric Mivelaz
Surplus-strong Switzerland is giving signs of deceleration in Q1. Although watch exports continued a five-consecutive-month expansion (CHF 1.67 billion), there was a strong rise of imports, caused mainly by chemicals and pharmaceuticals (+14.70% for Q1). March’s trade balance remains at a 3.5-year low (CHF 1.77 billion, 6-year average: CHF 2.60 billion). The cost of imports is being felt due to convergence towards USD/CHF parity and EUR/CHF at 1.20 since Q3 2017.
The Swiss National Bank says the CHF is highly valued (previous it said ‘overvalued’) and has a dovish view on the national economy. So for the moment there is no reason to expect any EUR/CHF massive changes from 1.20. USD’s strong rise since March 2018 (+4.26%) continues, recovering from a 0.9188 CHF low (16 February) and now approaching 0.99. The pair approaches the 0.9830 range in the short-term.
US rates fuel USDBy Arnaud Masset
A surge in interest rates has made long dollar trades appealing: the 10-year Treasury broke 3% while the 2-year hit 2.5%. Moreover, the ongoing sell-off in equities has deteriorated overall risk sentiment, which benefits the dollar.
The greenback extended gains Wednesday, amidst an upside shift in the US Treasury curve. Since Monday, the buck appreciated against all major currencies, with emerging markets taking the biggest hit. The Mexican peso tumbled nearly 2% as USD/MXN rose to 18.95, while the South African rand gave up 2.6%, with USD/ZAR rising to 12.45. G10 currencies have not emerged unscathed. The New Zealand dollar took the biggest hit, as investors unwound long bets, sliding another 0.5% this morning. The Japanese yen also went under heavy pressure as USD/JPY climbed back above 109.