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13 Mar 2014
Flash: GBP/CHF trade stopped out, still favouring longs - Nomura
FXStreet (Bali) - Nomura closed a GBP/CHF long position this week after the rate hit 1.455, however the FX Team still recommends long positions although are awaiting a better entry level.
Key Quotes
"In the medium term, we still believe the GBP will be one of the outperformers within European currencies, albeit at a smaller magnitude. The BOE is still likely to start hiking earlier than expected as spare capacity becomes used up. The rate market currently expects the BOE to start hiking in Q2 next year, and we believe chance of earlier tightening, in November, is still higher."
"We maintain our short bias for the CHF, as it is very unlikely for the SNB will scrap the EUR/CHF floor anytime soon while inflation momentum remains weak in Switzerland. In fact, it is likely, the SNB will lower its inflation forecast again next week, due to the recent negative CPI surprises."
"Our analysis suggests that the FX market is becoming more focused on inflation as several central banks shift their attention away from employment to inflation. As deflation concerns are rising in Europe, GBP/CHF long positions still have greater upside risks than downside risks this year and next year. Thus, we still want to trade the GBP/CHF from the long side and will look for a better entry point to sell the CHF and buy the GBP."
Key Quotes
"In the medium term, we still believe the GBP will be one of the outperformers within European currencies, albeit at a smaller magnitude. The BOE is still likely to start hiking earlier than expected as spare capacity becomes used up. The rate market currently expects the BOE to start hiking in Q2 next year, and we believe chance of earlier tightening, in November, is still higher."
"We maintain our short bias for the CHF, as it is very unlikely for the SNB will scrap the EUR/CHF floor anytime soon while inflation momentum remains weak in Switzerland. In fact, it is likely, the SNB will lower its inflation forecast again next week, due to the recent negative CPI surprises."
"Our analysis suggests that the FX market is becoming more focused on inflation as several central banks shift their attention away from employment to inflation. As deflation concerns are rising in Europe, GBP/CHF long positions still have greater upside risks than downside risks this year and next year. Thus, we still want to trade the GBP/CHF from the long side and will look for a better entry point to sell the CHF and buy the GBP."