The euro continues to see a lot of upward pressure, with the idea that interest rates continue to favor the Europeans, as well as the idea that they will raise them again, coming into the picture.
EUR/CHF
The euro is slightly positive against the Swiss franc during trading on Monday, as the market has been fairly quiet in general. The direction is mostly higher, but the structure right now is more or less consolidation underneath a significant amount of resistance near the 0.9450 level.
Right now, it's fundamentally a European Central Bank versus Swiss National Bank story. The interest rate differential, of course, favors the Europeans, and expectations for further hiking coming out of the European Central Bank have strengthened significantly, as persistent energy-related inflation is keeping risk elevated.
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The interest rate differential, of course, favors the Europeans
Deutsche Bank now expects an ECB hike this week, and another 25-basis-point move in December.
Against that, the Swiss National Bank remains around zero, giving the euro a meaningful yield advantage. The ECB policy rate of 2.4% versus zero out of Switzerland continues to make this an attractive long, but that doesn't mean that we take off easily.
At this point, a sustained break above the 0.95 level could really get this pair moving, but right now it looks like we are chopping along.
Keep in mind that on Thursday we have an ECB rate decision as well as a press conference, and that could give us a bit of a move.
The short-term pullbacks still look enticing and attractive to me as I continue to take advantage of the yield differential. This has been the way I have played this market for some time, and I will continue to do so going forward. I have no interest in shorting this pair anytime soon.
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