Uncertainty tops interest rates – Uncertainty waxed in August and so did USD, despite tighter interest rate spreads. If the Fed were to cut interest rates just as uncertainties subside, we think USD looks vulnerable. Our view.
The macro perspective
Swiss economy on shaky grounds – The slowdown in the global economy has not halted at Switzerland’s borders. Swiss companies are lately showing particular caution when investing. The health sector continues to boom. On the one hand, this benefits the sector’s value creation in Switzerland, and on the other, the pharmaceutical sector, whose exports continue their strong momentum. Our assessment.
FX market talk
Sterling’s history has something to tell us – The British pound continues to be buffeted by powerful political and economic forces that have pushed the currency far into undervalued territory. But, we note, there have been times, not even so very long ago, when Sterling was cheaper still – and even more volatile. In 1985 the pound touched its 288-year low of 1.04 against the US dollar, only to bounce back sharply later that year. The story has always been that Sterling eventually returns to fair value. But when? Our outlook.