© Julien Manceaux
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What performance do you expect from the Swiss Franc versus its major counterparts during the 1st of 2016?
For the moment the SNB is still intervening on the markets to support it. When we look at the interest rate differential between the Euro and the Swiss Franc, we can see that it is slowly going down, which is less favourable for the SNB' strategy This means that looking at the spreads today the Swiss Franc should be back at around parity right now, and because the SNB is still intervening, they did manage to keep it higher than that. This will probably continue during the first quarter. What is not likely for 2016 is that if the ECB comes in March with another set of measures regarding its own quantitative easing, we could see the spreads between the Euro and the Swiss Franc going further down. Thus, we started 2015 at 100 basis points and for the three month spread we are now at around 60. However, it could go even lover in March, if the ECB decides for example to enlarge its purchase programme every month. In that case, it will be hard for the SNB not to act a bit further on rates in the upcoming quarters. Fairly that March will be too soon again, but in June they could go a little bit further in terms of negative interest rates. It mainly depends on how the ECB will act and on how the interest spreads will behave in 2016. It is too soon to say that the SNB is completely done with easing, since 2016 could still bring some surprise, but most likely not during the Q1, since it will probably continue at the current level.
What will be the main drivers for the CHF during the same period?
The ECB's actions are clearly something very important. We believe that 2016 will not have that positive impact on the Euro as it might have been thought, because there are several political and stability factors that could influence the currency. For example the political crisis in Spain and in Portugal, the government is also not very stable and at least is not in favour of the European reforms we have had until now. Also we have the Brexit referendum in Great Britain and Greece still ensure of the European financial support. Thus, all this could be not favourable to the Euro, and the lower the Euro, the higher the Swiss Franc will be. That is also why the SNB will probably have an intervention again in 2016. In parallel the USD will probably continue to appreciate against both the EUR and CHF at least during the Q1 of 2016. Now we are probably seeing the last lag of the Dollar appreciation, because when we look at the US economic, clearly there is already some end of cycle signs. However, it should definitely remain quite strong in the Q1. For the Q2 and the rest of the year most likely trends will become less dollar supportive, which will also add to the SNB worries of course.
What are your forecasts for the USD/CHF and the EUR/CHF for the Q1 of 2016?
At the current moment, we have the EUR/CHF at 1.08 levels and in short-term for the Q1 we expect it to be around 1.05. Talking about longer term for the Q4 we could see it rolling up at 1.10 and further towards 1.15 at the end of 2017.