The time killer for the euro has passed? The Swiss Franc exchange rate is under tremendous pressure! EUR/CHF rates may rise sharply in the near future

a path EUR / CHF From March 2021 (with a break in early August and September), it’s still in a downtrend. At that time, prices fell from 1.11 (1.5 year high) to 1.04 (6 year low). One of the arguments for interest in the Swiss franc as an asset with a so-called safe haven remains unfavorable due to the pandemic’s turbulent investment sentiment. However, the position of the Swiss currency is also increasingly dependent on domestic factors.

One of the arguments in favor of strengthening the franc is the foreign capital inflows evident in the balance of payments data, which since the beginning of the pandemic, although now limited, indicate strong inflows of money in the form of deposits in Swiss banks or portfolio investments in shares of listed companies (perhaps including in That’s pharmaceutical companies). The fundamentals of the Swiss economy are also important, as they stand out favorably against the European background. The rate of GDP recovery after the pandemic crash has been strong and rapid, which, apart from the recovery in CPI inflation, has created market expectations of monetary policy tightening by the Swiss National Bank.

In addition, the space for the franc’s appreciation has been further increased by the gradual change in the Swiss Central Bank’s approach to exchange rate policy. While SNB activity in the forex market increased in previous years as the EUR/CHF rate approached 1.09 (2016), then 1.07 (2017) and 1.05 (2020) now – due to accelerating inflation – a deeper decline in EUR/CHF has not The exchange rate causes a stronger bank reaction in the forex market. Despite the fact that the Swiss franc, in the opinion of the Swiss Central Bank, remains “too overrated” Its rise is currently being treated as an alternative to raising the interest rate.

However, we believe that in 2022 the EUR/CHF exchange rate will rise slightly

The most important arguments in favor of overvaluation of the Swiss currency are an increase in risk appetite provided a significant improvement in the pandemic situation (including the aforementioned reduction of the financial flows mentioned above in the Swiss balance of payments) and a possible change in the European Central Bank’s rhetoric that The euro should strengthen against other currencies. However, the expected increase in the EUR/CHF over the course of the year will be preceded by another potential rally, albeit limited, for the franc at the beginning of 2022.

raw material market

The pressure on higher energy prices will continue in the coming months, although it will likely be temporary due to the disappearance of seasonal and political effects.

2021 brought significant price increases – and in the case of some energy resources (gas and coal). They were a combination of several factors. In the case of the crude oil market, we dealt primarily with it wide awakeAfter the economic shutdown period ends, the demand. It was met with a somewhat conservative reaction from the biggest miners. OPEC+ decided to cautiously increase production (400,000 barrels per day, increasing every month) to maximize profits. In contrast, the dynamic increases in gas prices are the result of overlapping factors: legal (EU regulations that have led to historical maximum prices for carbon dioxide emissions allowances), seasonal (usual price increases at the beginning of winter), Politician (Russia’s attempt to pressure European importers) and weather (Unfavorable weather conditions in the North Sea).

Our forecast assumes that crude oil prices will stabilize in the coming months at $70 per barrel of Brent crude oil. On the one hand – as the December OPEC forecast indicates – there is increasing optimism about the demand for this raw material in 2022 (the aviation sector remains a risk). According to the cartel, the demand of 100 million barrels per day (2019 levels) will be achieved in the third quarter of next year. On the other hand, the effect of increased demand on prices will be neutralized by a simultaneous increase in supply by the largest producers (a gradual return to pre-pandemic supply levels for the OPEC and Russia cartel, or the release of strategic oil reserves to opposite price increases announced before, Among others, the United States, China, India, and Japan.).

In 2022, shale mining records will be established by the United States. Small businesses we anticipate may exert temporary pressure towards lower raw material prices at the start of 2022 Strengthening The dollar in the international market, and therefore the currency used in the pricing of goods.