Pictet strategist on ECB, Fed, BOJ, and SNB outlook (with Anna Edwards, Guy Johnson)

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Pictet Wealth Management 5.9
Wealth Manager $600.00B
Loreline Renaud-Chatelain 7.5

Pictet strategist on ECB, Fed, BOJ, and SNB outlook (with Anna Edwards, Guy Johnson)

dxy

Outlook is balanced between Fed nearing end of cuts (dollar supportive) and potential for ECB upside risk/BOJ hikes (dollar negative).

yields

The yield curve need to react a bit more to the upside to this risk [of a hike]. Something that is definitely not in the price right now. Schnabel's hawkish comment introduces upside risk to market's complacent terminal rate view.

Loreline Renaud-Chatelain

Schnabel's comment on a potential hike is significant because market terminal pricing for ECB is well-anchored at 2% (no moves). This needs to be priced in, and the yield curve should react more to the upside.
Loreline Renaud-Chatelain

Bigger risk for ECB is a rate cut, not a hike. If Eurozone inflation goes closer to 1.5%, doves will get noisy, and a cut could be considered.

Expects Q1 inflation around 1.8%, well below target. Upward pressure from German fiscal policy, but disinflationary pressure from China and strong euro.
Loreline Renaud-Chatelain

Expects a Fed cut this week (hawkish cut), then a quarterly pace of cuts (March, June). Second half depends on new Fed chair.
Loreline Renaud-Chatelain

BOJ terminal rate aligned with market at ~1%. Could go to 2% if inflation doesn't come down or yen weakness continues. A 2% BOJ rate would mean a much stronger yen.
Loreline Renaud-Chatelain

SNB could be first to cut if domestic services inflation goes negative, but they are reluctant; could be the surprise of the week.

SNB can't intervene vs dollar due to Treasury scrutiny, only can prop franc vs euro. Franc strength during market stress complicates their position.

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