USD/CHF
Swiss Franc experienced a robust performance throughout the course of 2023. Notably, within the G10 currencies, the Franc demonstrated the most substantial gains against the US Dollar over the past 12 months. The pivotal question arises: will the Franc's impressive strengthening trajectory persist into the year 2024? However, prevailing sentiment leans towards skepticism, suggesting that such a continuation is unlikely.
This skepticism is rooted in the aggressive expectations surrounding potential interest rate cuts by the Federal Reserve (Fed). These expectations triggered a consequential and precipitous decline in the value of the US Dollar (USD). Simultaneously, escalating tensions in the Middle East further fueled this phenomenon, contributing to the sudden and pronounced appreciation of the Swiss Franc in the month of December.
Examining the outcomes, it becomes evident that the Swiss Franc emerged as one of the most robust performers against the US Dollar throughout 2023. During this period, the Franc exhibited a formidable appreciation, strengthening by an impressive 9.8% against the Dollar.
Among major global currencies, only the Mexican Peso outperformed the Franc, achieving a higher return at +14.8%. Notably, the Swiss Franc outpaced all other G10 currencies in 2023, largely attributed to strategic interventions by the Swiss National Bank (SNB). Nevertheless, a notable shift occurred in the bank's stance during the December meeting, where it acknowledged a diminished risk of inflation.
Consequently, the outlook for the Swiss Franc in 2024 remains, at best, neutral. This cautious stance takes into consideration the potential resurgence of market uncertainties. Looking further ahead to 2025, expectations are for a more significant cooling of the Swiss Franc, driven by a broad-based revival in economic growth.
In terms of specific currency pairs, the USD/CHF exchange rate has already rebounded to the 0.85 level. Projections suggest that this rate is likely to persist below the 0.90 threshold in the upcoming quarters. Conversely, the EUR/CHF pair may experience a gradual recovery, surpassing the 0.95 mark and potentially approaching 1.00 once again by the conclusion of the current year.
GBP/USD
The euro exhibits a mild downward trend, while the pound, for the past month, has been meandering within a lateral channel delimited by the red lines on chart.
Notably, macroeconomic and fundamental events currently exert only an indirect influence on the pound. The prevailing price range remains within a flat corridor, presumably oscillating between the upper and lower boundaries of the sideways channel, vividly depicted by the red lines on the graphical representation. Our anticipation leans towards a substantial depreciation of the pound. However, it is crucial to observe that the Bank of England steadfastly maintains its stance, exhibiting no discernible indications of readiness to soften its rhetoric concerning the baseline interest rate.
In light of this, the market anticipates a near-term reduction in interest rates in the United States, followed by a subsequent reduction in interest rates within the European Union. Interestingly, there is an absence of a parallel reduction in interest rates in the United Kingdom, primarily attributed to the persistently elevated inflation level—twice as high as the targeted threshold. This scenario ostensibly provides a buttress for the British currency. its While fortitude may fall short of triggering a substantial resurgence, it does, nonetheless, seem adequate to avert a precipitous decline.
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