Euro expected to rise even more against the Swiss Franc
(by Arnaud Masset)
The EUR broke back above 1.10 CHF yesterday, it’s first time above that rate since June 2016. Moreover, we believe there is room for further appreciation of the EUR against the CHF.
Since the election of Emmanuel Macron as France’s President in early May, the EUR has strengthened against the EUR, as investors’ fears of a EUR rout were reduced. Confidence in the EUR rebounded, translating into a yield rally that allowed German 10-year bonds to climb back into positive territory. Moreover, the prospect of the European Central Bank reducing its Quantitative Easing program gave a fresh boost to European yields and fuelled the EUR/CHF rally.
EUR investors still should remain cautious. ECB Chairman Mario Draghi will take it slow in unwinding the bank’s loose monetary policy. This, plus faltering inflation pressures, make it unclear whether the ECB will cut rates at its next Monetary Policy meeting on July 20.
Yen will keep falling, as Bank of Japan defies other central banks on rate hikes
(by Yann Quelenn)
The Bank of Japan looks likely be the only major central bank that will not to raise its interest rates this year. This is one great reason why investors are staying away from the JPY.
The yen keeps just keeps on falling. The USD is now at around 114 JPY, the yen’s weakest since mid-May, compared to levels of around 100 JPY in September of 2016. JPY’s movements against the EUR have been similar. JPY’s decline is driven be monetary tightening from other central banks: first the US Federal Reserve, then the ECB, with similar moves expected from the Bank of England, Bank of Canada, Norway’s Norges Bank and Sweden Riksbank.
Meanwhile, nothing has changed in BoJ’s monetary policy. The Japanese institution is still set to purchase an unlimited amount of bonds at a defined yield.