Editor’s note: With so much market volatility, stay up to date with the daily news! Get caught up in a matter of minutes with our quick summary of today’s essential news and expert opinions. Register here!
(Kitco News) – Analysts at German invention bank Deutsche Bank have released a controversial research note suggesting that the Swiss franc (CHF) is better at hedging inflation than gold. The analyst’s note said that “the Swiss franc is now better hedging against the inflation spiral than gold.” The Swiss National Bank (SNB) raised interest rates by 50 bp for the first time in 15 years yesterday. Some analysts have claimed that the SNB only made the decision to keep up with the BoE and the Fed.
“This rate hike will be a considerable surprise for the domestic market in particular, where expectations of any policy change today were minimal at this meeting,” said Robert Winkler, Deutsche Bank’s foreign exchange analyst.
He added: “Combined with the sharp rise in interest rates, the signal on the market is even clearer than it has been in recent months: the SNB now wants a stronger Swiss franc. The reason is clear: to prevent the transmission of a excessive inflation from the eurozone “.
The SNB, like all other central banks, took this step to prevent inflation from “spreading more widely”. Inflation reached 2.9% in May, the highest level in about 14 years. The bank said: “Strict monetary policy aims to prevent inflation from spreading more widely to goods and services in Switzerland. Finally, the bank noted:” It cannot be ruled out that further rate increases are needed SNB policy in the foreseeable future “.
Looking at the daily chart below, the USD / CHF price fell after the rate decision, but we need to see if the trend continues as inflation seems to bite. This only seems like a brief reversal of a decent uptrend and a break in the chart support level would inspire more confidence in the CHF bullish.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor can the author guarantee this accuracy. This article is for informational purposes only. It is not a request for any exchange of goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article does not accept guilt for loss and / or damage resulting from the use of this publication.