(MENAFN- Gulf Times) The reasons for an enduring Swiss franc rally against the euro just keep adding up.
Souring market sentiment from the coronavirus and geopolitical tensions have already driven the haven currency up 1.5% this year, and the rally has further to go for MUFG Bank Ltd. The franc touched its strongest level since April 2017 last week.
This week any further spread of the virus will continue to be a market driver, while traders will look to speeches by European Central Bank Christine Lagarde and Federal Reserve chair Jerome Powell today for clues on the prospects for monetary easing, which have been pressuring the euro. Sweden and New Zealand will also hold rate decisions.
'We expect the Swiss franc to remain in demand amidst weak global growth and the ongoing shift to looser monetary policy, said Lee Hardman, a currency strategist at MUFG, predicting a steady climb to 1.04 per euro by the end of 2020, a level not seen in almost five years.
'Historically the Swiss franc has been a better store of value than other major currencies. We don't see that changing.
It's an appreciation that could irk the Swiss National Bank, which sees sudden surges in the franc as a deflationary threat and a risk to the competitiveness of Swiss exports. With their policy rate already at a record low of minus 0.75%, the SNB has little room to cut further to weaken the currency.
So far this year the central bank has refrained from directly intervening in foreign-exchange markets but President Thomas Jordan said earlier this week it won't shy away from it given the franc remains 'highly valued.
Switzerland was added back on the US watchlist for currency manipulators earlier this year.
'Franc dominance seems to be here to stay, although I would expect an SNB intervention sometime soon, said Kyriakos Pavlou, a trader at Eurobank Cyprus Ltd, one of the top 10 most accurate forecasters in Bloomberg's Group-of-10 currency survey. Pavlou remains watchful of 'the extreme level of 1.0650 per euro for the franc.
What to watch: US Fed chair Jerome Powell delivers semiannual monetary policy report to Congress today, semiannual testimony to the Senate Banking Committee tomorrow; Fed's Patrick Harker discusses the economic outlook and Mary Daly gives a speech in Dublin, while James Bullard, Neel Kashkari also speak today.
ECB president Christine Lagarde speaks at the European Parliament in Strasbourg today.
On Thursday, Mexico's central bank is expected to cut interest rates by 25bps for a fifth time to 7%.
The lowering of tariffs by China and the US on each other's imports will be effective from February 14 at 1:01 pm in Beijing.
Economic releases include: Canada housing starts, building permits, France industrial sentiment, Italy industrial production and China CPI.
UK GDP, industrial production (February 11); US monthly budget statement, New Zealand and Sweden rate decisions, euro-area industrial production on (February 12).
US jobless claims, CPI, German inflation, UK RICS house prices (February 13). US retail sales, industrial production, U Michigan sentiment, Germany and euro-area GDP (February 14).
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