Bank of America suggests a long AUD/CHF trade in anticipation of policy divergence between the Reserve Bank of Australia and the Swiss National Bank at their upcoming June meetings. The recommendation is based on recent Australian labor market data reinforcing a higher-for-longer rate stance from the RBA.
Key Points:
RBA Policy Outlook:
- Expected Rate Decision: BofA anticipates the RBA will keep rates unchanged at 4.35% during the June 18 meeting.
- Labor Market Data: An unexpectedly strong jobs report, with unemployment falling to 4.0% and significant full-time job growth (+41k vs. -2k part-time), supports the case for a stable or higher rate environment in Australia.
SNB Policy Divergence:
- Policy Expectations: The Swiss National Bank's (SNB) policy stance is expected to diverge from the RBA, presenting a favorable environment for AUD/CHF trades.
Trade Recommendation:
- Long AUD/CHF: BofA recommends going long on AUD/CHF, capitalizing on the anticipated policy divergence and the robust Australian labor market data which supports a higher-for-longer rate stance from the RBA.
Conclusion:
Bank of America recommends a long position on AUD/CHF, driven by strong Australian employment data and the expectation of policy divergence between the RBA and SNB in their upcoming meetings. The robust labor market performance in Australia strengthens the conviction in higher-for-longer trades, presenting a favorable opportunity for AUD/CHF.
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