Mon, Apr 1st 2024
Bank of America strategists anticipate a significant shift in the value of Swiss Francs against the Euro.
Strategists from Bank of America (BofA) have projected a notable change in the exchange rate dynamics between the Swiss Franc and the Euro. Claims a report from Bloomberg/cash.
According to their analysis, the Swiss Franc is expected to reach parity with the Euro this year, followed by a further devaluation of the Swiss currency to 1.10 against the Euro by the end of 2025.
This bold prediction follows the Swiss National Bank’s (SNB) decisive action in mid-March to reduce interest rates by 25 basis points.
As BofA strategists suggest, the move indicates an urgent shift towards a more lenient monetary policy, necessitating a reevaluation of the anticipated pace of the Swiss Franc’s depreciation.
The Swiss Franc, currently the worst-performing currency among its G-10 peers, is poised to continue its downward trajectory toward equality with the Euro by October.
Such an event would mark a significant reversal from the trend observed in March 2023, when the Swiss Franc commenced a rally that propelled it to a record high against the Euro.
The SNB’s rate cut accelerates the Swiss Franc’s depreciation. This development diverges from BofA’s previous forecasts, which had anticipated parity by the final quarter of the following year.
Despite the adjustment in the timing of the rate cuts, BofA maintains its initial prediction for the total reduction in rates during this cycle at 125 basis points. The strategy is expected to involve rate cuts at all meetings this year, culminating in the cessation of the easing policy in early 2025.
The declining interest rates are anticipated to render the Swiss Franc an appealing option for carry trades.
As the financial community watches these developments closely, the potential parity and subsequent rise in the Euro against the Swiss Franc could have far-reaching implications for investors and the broader currency markets.
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