CHF/JPY Outlook: The outlook is bullish as the rate stands well above its recent average and is near recent highs, mainly driven by market reactions to Japanese fiscal policies.
Key drivers:
• Rate gap: The Swiss National Bank (SNB) is facing pressure to consider rate cuts due to deflation risks, while the Bank of Japan (BoJ) is tightening monetary policy, expanding the interest rate differential favoring CHF.
• Risk/commodities: Rising oil prices could support the JPY, yet the current volatility may introduce uncertainty in the market, influencing movements for both currencies.
• One macro factor: Concerns around Japan’s fiscal sustainability, particularly with tax cuts proposed ahead of upcoming elections, are affecting confidence in the JPY.
Range: The CHF/JPY rate is likely to consolidate within its recent range, potentially trending towards the upper extremes as current drivers reinforce its strength.
What could change it:
• Upside risk: A stronger-than-expected economic report from Switzerland could boost CHF further.
• Downside risk: If market conditions lead to aggressive intervention by the Japanese authorities to support the JPY, it may negatively impact CHF/JPY.