💱🔺Swiss Franc Leads G10FX Ignoring Consumer Prices: Cable FX Macro

• We have seen currency rate drivers outside price impulses in the G10, however, when focusing on inflation, we find the outliers diverging substantially

• Take for example the Swiss franc, it leads the G10 year-to-date, up 2.9% vs the USD. It also records the lowest inflation rate in the group, even Japanese headline prices accelerate by a faster pace

• Holding to our spot FX/inflation relationship, the antipodes should be performing 3-4 percentage points higher vs the USD, according to our model

• A similar pattern is seen in the NOK, headline prices in Norway accelerate by about the same pace as in the eurozone and Canada. However, the krone bottoms the G10FX performance year-to-date, down circa 6.7% vs the dollar

• If we were to see a comeback of inflation as a driver of FX rates, then going long AUD, NZD, and NOK vs CHF and CAD would make sense, our model shows