Vontobel cuts USD overweight

Vontobel Asset Management has announced that it is set to cut its USD overweight as the near- term risk/reward ratio looks less attractive, according to the Swiss firm.

As a result of the Investment Committee decision, Vontobel will be reducing its USD overweight from +7.5 %to +2.5 %in euro and Swiss franc portfolios.

The remaining overweight reflects  recently purchased gold exposure.

In USD portfolios, Vontobel will decrease the level of aggregate foreign currency.

The Swiss asset manager believes  that short-term risks, stemming from weaker economic data in the US is set to undermine the sentiment for the currency over the next months.

“Since the spring of 2014, the USD has rallied from 1.40 to a level of just below 1.10 to the euro. We believe that the greenback is in the final stage of appreciation versus the European and the Swiss currencies” the group stated.

Nevertheless, Vontobel expects the overall outlook for the US economy to remain solid, with US GDP growth to hit around 2.5% this year and headline inflation to gradually rise to 1.6% in 2016 and 2.5 percent in 2017.

As a result of this stabilisation, Vontobel believe the US Federal Reserve (Fed) will lift interest rates in three steps by a cumulative 75 basis points this year.

“Given the widening gap between the monetary policies in the euro zone and the US, we expect the dollar to rise towards 1.02 to the euro and 1.08 to the Swiss franc in 2016” the group states.

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