USD/CHF, EUR/GBP, AUD/USD - Counter specific issues to the fore

CHF still getting ZIRP’d by its increasingly unicorn status policy stance, with USD/CHF stretching towards 0.8350 highs with the major retracement around 0.84 above. While the market is creeping some tightening odds into SNB pricing, it still only has a 25bp hike in by Q1 next year. The SNB was more adamant than that that it sees inflation low at unchanged rates through the horizon, although with an eye on FX it did have incentives to push that message. That preference (for weaker rather than stronger) vs Japan is another standout reason for it being under pressure right now.

Elsewhere, the failed test of EUR/GBP resistance as earlier noted has done a bit of chart damage and proved a bit of a bull trap. IMM data showed the market swinging very short GBP on relative policy considerations running into the cable lows, and with one eye too on the Budget. That’s left it a bit exposed to consolidative/corrective action and actually a bit of a squeeze, especially with BoE speakers flagging a likely Nov hike now unless energy backdrop changes swiftly.

AUD looks next to the RBA. As the Weekly notes, a hike is 100% in the price so its all about the guidance in the statement and presser. There’s another hike fully in the price by Q1, hedged towards a further by mid year (or at least policy premium in that direction). There’s some attention on how far the RBA can go before it starts to pressure the housing market too much, so that balancing act is part of the equation as it calibrates the right inflation targeting level of tightness.