USD/CHF, AUD/USD, and NZD/USD forecasts this year

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USD/CHF, AUD/USD, and NZD/USD forecasts this year

US Dollar/Swiss Franc

Given its status as a “safe haven” currency, the Swiss franc (CHF) has become the top choice for those seeking stability amid the geopolitical crisis in Ukraine and the Middle East.

As these struggles continue, the Swiss franc is likely to remain a popular choice due to its “protective” profile.

Another factor contributing to the strength of the Swiss franc is that the Swiss National Bank has successfully controlled inflation below its 2% target, thus maintaining a relatively stable inflation environment.

However, perhaps the most important factor behind the strength of the Swiss franc last year was strong monetary intervention by the Swiss National Bank to strengthen the currency.

As part of its monetary policy tightening, the central bank has been buying (selling foreign currency) Swiss francs on the foreign exchange market, arguing that imported goods provide a strong buffer against inflation. Frank is essential.

Looking ahead, the market currently expects the Swiss National Bank to cut interest rates by about 70 basis points next year. This suggests that the Swiss National Bank's monetary policy will not be as aggressive in cutting interest rates as the Federal Reserve or the European Central Bank.

Even if the SNB stops intervening, it must provide support to the Swiss franc in 2024.


Australian Dollar/US Dollar

The story of the Australian dollar (AUD) in 2023 is not a pretty one.

The Fed started raising interest rates before the Reserve Bank of Australia (RBA), making the dollar more attractive due to the difference in interest rates. It is heavily overweight on AUD/USD.

But things may be different in 2024. The Fed is singing a new song. Interest rate cuts have recently been hinted at, perhaps lower than Australian rates. This will narrow the interest rate differential and strengthen the Australian dollar.

However, despite the tightening of interest rate spreads, the Australian dollar faces some challenges. China, Australia's main trading partner, is showing signs of economic slowdown. This may harm Australia's exports and limit its economic growth, which will have a negative impact on the Australian dollar.

In addition, if the Reserve Bank of Australia raises interest rates and leads to a severe economic slowdown or even a recession, the Australian dollar could fall significantly.

However, if the RBA succeeds in achieving a “soft landing” for the economy and avoiding a recession, or if the global economy rebounds unexpectedly, economic growth and inflation in Australia are likely to remain strong, which will be positive for the Australian dollar.

Will the Australian dollar take off or face problems in 2024? Please follow the Reserve Bank of Australia's February meeting. The Reserve Bank of Australia will release its quarterly monetary policy statement as well as release its latest economic forecasts and hold a press conference. Their tone and any indication of future interest rate decisions will have a significant impact on the AUD/USD moves.

NZD/USD

Inflation, employment and wage growth are all declining, suggesting the Reserve Bank of New Zealand (RBNZ) may start cutting interest rates in the summer. However, there are several factors that add uncertainty to this approach.

Continued increases in immigration and higher government spending under previous administrations may push inflation higher than expected. This will make it difficult for the Reserve Bank of New Zealand to cut interest rates.

Recent changes in the New Zealand government may also have a significant impact on RBNZ policy.

New Zealand's recently elected conservative coalition government plans to implement tax cuts that will curb inflation.

They want to shift the RBNZ's focus from its "dual mandate" of controlling inflation and unemployment to controlling inflation alone ("price stability"). Parliament recently passed a bill to abolish the mandate.

This could mean higher interest rates for a longer period of time, which would be positive for the New Zealand dollar.