Credit Agricole

CHF: no denying parity no more EUR/CHF dipped below parity yesterday for the first time since 7 March, as prior to that such levels had not been seen since January 2015 and the aftermath of the floor removal. Three months ago, the pair was quick to reverse higher as the SNB possibly lent a hand with increased FX interventions, something that could be confirmed by today’s publication of FX interventions data from the SNB for Q122. However, the reality of March is no longer the same today after the SNB undertook a massive U-turn in its assessment of the CHF in June, no longer estimating the CHF as being “highly valued” while also warning of potential two-way FX interventions. As a result, with lower resistance to potential CHF strength, parity or close to could become the new normal for EUR/CHF going forward,

CAD: don’t settle for second best The CAD has been the G10 currency to cope best with this year’s USD strengthening, as the CAD has been able to benefit from (1) a hawkish central bank relative to peers; (2) positive terms-of-trade shock from higher energy prices; and (3) its closer ties to the US macro cycle. With regards to the latter, it has to be noted that the Canadian economy has possibly fared better than the US this year, avoiding the pitfall of a growth contraction in Q122 followed by solid momentum in Q222. The latest Canadian GDP figures due out today could nicely complement he frothy jobs and retail sales data of late, although we doubt that they could provide the CAD with a meaningful boost on the day when month-end and quarter[1]end flows are possibly more influential. Furthermore, the market could also keep an eye on the monthly meeting of the OPEC+, although any further lifting of the production curbs would still be overshadowed by the real struggles to actually ramp up supply on the ground.

GBP: independent of political noise A day after UK MPs gave their initial approval for a bill to potentially override part of the Brexit deal, Scotland’s First Minister set plans for the country to eventually hold a consultative referendum on the country’s independence, even pencilling in 19 October 2023 as the day for the vote. In practice, she has asked the UK Supreme Court to rule on whether such a vote would be lawful, and especially in the absence of approval from the UK government, which is unlikely to diverge from its stiff opposition. While the timeline for the Court to give its verdict remains unclear, we for now doubt that the latest manoeuvres from the SNP could significantly revive the fears of a UK break-up. The GBP has seemingly largely concurred by avoiding a dramatic underperformance vs the EUR yesterday, while ultimately threats of the UK altering the Northern Ireland protocol and the subsequent possible retaliation from the EU loom as a bigger near-term risk for the GBP, which at the minute can only really rely on the fact that it is undervalued and oversold for some respite. On the day, attention will be on the parliamentary hearing of upcoming MPC member Swati Dhingra for any eventual hints to where she ranks on the hawk/dove scale, as she is due to replace prominent hawk Michael Saunders from August onwards.