The coronavirus is preoccupying the financial markets. Safe assets are booming, while safe-haven currencies are weakening. Swiss Life Asset Managers believes that the USD is likely to gain strength again.
The massive increase in infection rates in Europe is having a positive impact on government bonds and gold. However, the CHF and USD are among the losers in the crisis. This is probably due to the sharp drop in interest rate expectations in the US. Having said this, Swiss Life Asset Managers considers the market pricing for the Fed to be too aggressive and expects an interest rate rise once the coronavirus risks diminish. Due to the sustained performance of the US economy compared to Europe, Swiss Life Asset Managers has a positive view of the USD versus the CHF and EUR.
As it does not expect any further appreciation of the CHF, Swiss Life Asset Managers is maintaining its neutral view of EUR/CHF. As predicted, the JPY has lost its safe-haven status. Alongside the coronavirus pandemic, the Japanese economy is also suffering from the consumption tax hike. Both are set to weaken the JPY further against the USD.