UBS modified its outlook on the Swiss franc, adjusting the currency’s status from “least preferred” to “neutral.” This reassessment comes amid expectations that the U.S. dollar will maintain its strength, with potential for intermittent increases in value.
However, UBS does not anticipate a sharp rally or significant depreciation of the dollar when the Federal Reserve begins its rate-cutting cycle, which is expected to start in September.
UBS’s forecast suggests that geopolitical uncertainties, particularly those related to the Middle East, are likely to persist. The firm notes that unless there is a surge in oil prices due to actual disruptions in supply, these geopolitical factors should not lead to a substantial increase in market risk aversion.
The firm continues to encourage investment in currency crosses, which involve trading between two currencies, excluding the U.S. dollar. UBS’s adjustment to the Swiss franc’s status indicates a change in the perceived risk and potential return of holding or trading the currency.
The reassessment of the Swiss franc by UBS reflects a broader analysis of the currency’s position in the market. Previously considered as a less favorable option, the Swiss franc’s new “neutral” rating suggests that the risks associated with short positions in the currency may have diminished.
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