Swiss bank richer than ever
By Yann Quelenn
The balance sheet of the Swiss National Bank just keeps getting bigger – data released today show it at a record high, nearly three-quarters of a trillion US$ in value. And it is likely to keep rising along with the buoyant Swiss franc.
The EUR/CHF is back below 1.16, with the euro driving. Quantitative easing from the European Central Bank is set to continue until at least until September 2018, which will dampen the euro and thereby pump up the franc. Although inflation seems to be back in the US, it slowed unexpectedly in Europe in October, so the ECB is not expected to change course anytime soon.
Itexit risk dampens euro
By Peter Rosenstreich
Anti-establishment parties polled well in Sicilian regional elections, which suggests they might place strongly in 2018 national contests. A centre-right coalition led by former Italian Prime Minister Berlusconi solidly won: Nello Musumeci took 40% of the vote. Meanwhile, Five Star’s Giancarlo Cancelleri garnered an impressive 35%. This brought out the bear, sending the EUR/USD to a 1.1566 low.
Italians have shown the highest dislike and preference to leave the European Union of any member nation. Yet we still believe the EU will be able to keep Italy in the fold and therefore would fade short-term risk volatility. Moreover, the European Central Bank’s loose monetary policy and a solid global economy will support output growth.
Aussie bank waits
By Arnaud Masset
The Reserve Bank of Australia finds itself in a tricky place, as the economy improves and cuts its mining dependence, yet inflation and retail sales send mixed signals. The answer: do nothing for now. Markets are not pricing in an interest hike before the Q3 2018. So the trend in AUD/USD will be down.
There might be blips. A positive surprise in inflation or a failed Trump tax plan could trigger an AUD rally. AUD/USD is currently testing the key 0.76-0.77 area and has been unable to validate a break of the $0.77 resistance (200-day moving average). The greenback rally is losing steam amid a lack of positive news in the US, so a return towards $0.78 appears likely in the short-term.
The RBA today held its Cash Rate Target unchanged at record low 1.5% and maintained its growth forecast of 3% over the few next years. The bank expressed concern about the weakness in inflation (CPI eased to 1.8%y/y in the third quarter, down from 1.9% in the previous one) and warned that further Aussie strength could only worsen matters.