Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Swiss Franc Is Best Bet in History of Fed Easing, JPMorgan Says

Forex Jun 11, 2019 03:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

(Bloomberg) -- Swiss franc bulls have history on their side as speculation grows that the Federal Reserve is about to cut rates.

The franc was the best-performing currency during the past four rate-cutting cycles, according to JPMorgan Chase & Co (NYSE:JPM). It’s already rallying as Treasury yields plummet, evidence the pattern might repeat. JPMorgan believes it will, leading the bank to upgrade its franc forecast on Monday.

“A downturn in the global economy and risk markets would have the potential to drive sharp and accelerated gains in CHF,” Paul Meggyesi, currency strategist at JPMorgan, said in a report.

He now sees the franc strengthening to 0.95 against the dollar, the strongest since March of last year, versus the previous target of 0.98, reflecting the likelihood of Fed easing. The rates market is pricing in about 78 basis points of cuts over the next 12 months, according to forward contracts.

With recession risks rising amid trade tensions between the U.S., China and other global partners, investors have rushed to haven currencies. In the past month, the franc has advanced more than 2% versus the greenback, topping all other peers in the Group-of-10. The Swiss currency was little changed at 0.9900 per dollar as of 8:06 a.m. London time Tuesday.

Switzerland’s current account surplus, which amounts to 10% of gross domestic product, or three times as much as Japan, makes the franc a stronger refuge, JPMorgan said. The yen is the franc’s preeminent rival for safe-haven status among currencies, according to the report.

The yen is also expected to lure buyers seeking safety from trade wars. But it’s been topped by the franc’s average performance in the 12 months following the first cut in major Fed easing cycles of 1981, 1989, 2001 and 2007, according to JPMorgan. The franc is also one of the top three performers around the last five U.S. recessions, the bank said.

To be sure, the Swiss National Bank could consider slowing the franc’s appreciation. But JPMorgan points out that the SNB did not intervene in any material size during the Italian crisis last year.

“The currency is rather less constrained by the SNB than it has been for much of the past decade,” Meggyesi wrote. “Entering the next recession with reserves at 120% likely means that the SNB will need to be more accepting of fundamental pressure for CHF appreciation than it was entering the financial crash when FX reserves were less than 15% of GDP.”

He added: “The SNB’s magazine may not be entirely empty, but it has far fewer bullets than it once did.”

Swiss Franc Is Best Bet in History of Fed Easing, JPMorgan Says

Related Articles

EU agrees rulebook for 'Wild West' crypto markets
EU agrees rulebook for 'Wild West' crypto markets By Reuters - Jul 01, 2022

By Huw Jones and Tom Wilson LONDON (Reuters) - The European Union on Thursday reached a provisional deal on the world's first set of comprehensive rules to regulate what one...

Dollar Edges Higher, Lifted by Safe Haven Demand
Dollar Edges Higher, Lifted by Safe Haven Demand By - Jul 01, 2022 3

By Peter Nurse - The U.S. dollar edged higher in early European trade Friday, trading close to the highs of the year on safe-haven demand as central banks take on...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email