Short-term movement may be dictated by EUR/CHF
The expectation of Fed tapering has led many to believe that yields in the US have likely seen their lows with the T-Note having posted a bottom at 1.379% (25/07/2012). Thus when the Fed begins to taper, currently thought to be in either December or January, yields are expected to maintain their upside bias. This anticipation of higher yields is a clear support to the US Dollar. However, it can be argued that even if the status quo remains regarding yield support, an improving current account
should act as a strong support for the US Dollar. Turning our focus to the Swiss economy, we note a robust economic backdrop with low unemployment, low, but rising inflation and stable GDP growth. All of these act as supports for the Swiss Franc, with the exception of rising inflation, although it remains close to zero YoY. In their latest Quarterly Bulletin the SNB state that their inflation expectations remain low, but they are consistent with their definition of price stability. In any case we
note a near-term rising inflation trend.
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MIG Bank