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The US dollar and the Swiss franc – “port of refuge” in the face of financial storms. What could “save” the euro and the pound sterling


It is rare to see such a consistent trend in foreign exchange markets as in the first half of this year. The US dollar appreciated sharply, not only against the Euro, but also against other major currencies, including the pound sterling, the Japanese yen or the Chinese yuan.

The euro lost 7.5% this year and the pound 8.9%, in both cases almost the entire depreciation taking place after February 24.

Against the Swiss franc, from February 23 to May 10, at 20.00, the dollar gained 8.5%, and from the beginning of the year, 9.2%.

The Japanese yen retreated 13.2% in the same period.

The yuan has also fallen 6.1% since the beginning of the year.

The direction of capital migration was clear and the intensity of the movement strong.

In the realm of foreign exchange, the US dollar clearly dominated, offering refuge, but unlike other situations in the past, without being “helped” in this “effort” by other currencies.

The only real “port”, or at least the best shelter – because, in relative terms, at certain times, the Swiss franc offered refuge, in turn – was the US dollar.

What can be said about virtual currencies

Bitcoin has not lived up to the expectations of older fans: not only has it not provided security, but it has lost considerable ground, from over 46,000 in the opening and nearly $ 48,000 on the first day of the year to below 30,000 on May 10, before a slight recovery that brought this year’s depreciation to 32.2%.

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And this, in the territory of cryptocurrencies, is a very good performance, other securities registering much higher depreciations.

Today, US inflation is expected to fall to 8.2% from 8.5% in April. As for the core core series, which does not take into account certain products, it is expected to fall to 6.2% from 6.5% last month.

The data will be very closely monitored to see if it validates the hopes of some observers for overcoming the “peak”, and the beginning of a resettlement period.

However, interest rates are expected to continue to rise.

In December, the US interest rate is most likely to be 2.5-2.75%, according to CME traders, down from a week ago, when the first chance would have been 2.75-3%.

However, there are benchmarks far above those in Europe, where the ECB is still debating the optimal time to raise the benchmark interest rate from 0%, and continues to inject liquidity, albeit at a declining pace.

On Wednesday morning, the yield on 10-year government bonds reached 2.93% in the US and only 0.97% in Germany.

The dollar is supported both by the need for security, along with the repatriation of capital from jurisdictions seen as more risky, and by more attractive interest rates.

In addition, Europe is feeling the effects of the fighting in Ukraine in a much more pronounced way, and the United Kingdom is also vulnerable to a sharp rise in inflation, in addition to the discomfort caused by Brexit.

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The situation of those who have taken out fixed interest loans for only 2 or 5 years in the United Kingdom is also delicate.

Beyond certain technical or temporary adjustments, for currencies such as the Euro or the pound sterling, a clear line of ceasefire is needed to restore the chance of a lasting appreciation.

The US dollar could, in the current context, remain in the attention of investors in the medium term, although from these levels, technical corrections are possible.

In addition, the Swiss franc, despite the central bank’s significant efforts, could experience a relative revival in the coming months, against both the euro and the US dollar, as markets rediscover the need for an alternative refugee asset and take over. considering a slowdown or even risks of recession next year in the US.

For the euro and the pound, the rescue would come from a quick end to the conflict, even of a temporary nature, which would restore a pronounced optimism in the respective economies and support the currencies. It’s a scenario that, for the moment, doesn’t seem to be at the forefront of probabilities.

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