In a world where the market is expecting central bankers to wind up their monetary easing, the odd man out could prove costly in terms of depreciation of the currency. Swiss National Bank (SNB) is likely the odd man out and an increasingly focused market on a rate hike is likely to add to the depreciating force. We expect the SNB to be one of the last major central banks to wind up its asset purchase and that is not likely to help the franc in gaining against a weaker dollar.
One must also take note of the EUR/CHF pair which has finally started the breaking the ceiling with franc depreciating materially against the euro, reaching the weakest level since the SNB removed its 1.2 floor in January 2015. We expect the euro to depreciate in the short term and that is likely to add pressure on the franc which enjoys a very high correlation with the single currency.
We expect the USD/CHF, which is currently trading at 0.971 to depreciate and first test parity and then weaken beyond it towards 1.02.
