Swiss Franc Interest Rate Bias: Neutral
The Swiss Franc is one of the very few currencies in which markets believe that interest rates will rise through the medium term. Indeed, we see that the difference between 3-month CHF yields and 2-year rates stands at 7 basis points in favor of the longer-dated interest rates. This tells us that interest rate traders believe short-term interest rates will largely remain unchanged through the medium term, with a marginal probability of a Swiss National Bank rate hike in the longer-term. This gives us a fairly neutral interest rate bias for the Swiss Franc, but we note that such an assessment is favorable compared to an explicitly bearish bias for currencies such as the British Pound, Australian Dollar, and New Zealand dollar.
