The shift in monetary policy expectations led to an appreciation of the USD. Swiss Life Asset Managers expects another USD rise and a sideways movement in the EUR/CHF exchange rate.
In June, the US Federal Open Market Committee (FOMC) surprised the markets. It raised the key interest rate forecast for 2023 by 50 basis points. However, as the markets expected an earlier rate hike, the US and European government bond yield differential widened. This was compounded by the positioning of speculative investors as the tide turned in favour of the USD. Both strengthened the USD, causing the EUR/USD exchange rate to fall by almost 3% in June.
Swiss Life Asset Managers remains firmly committed to its outlook for the next three months. Given the yield differential and rapidly closing US output gap, it expects the USD to rise further. It also expects interest rate differentials between Switzerland and the Eurozone to remain stable and the EUR/CHF exchange rate to continue to move sideways.
