FOREX: USDCHF Weakness Extends, Approaches Fresh 10-Year Lows

GBP/USD's latest press higher has spot through yesterday's highs and touching a new YTD best of 1.2952, extending the rally off the YTD lows to 7%. GBP's not leading strength across G10 here, again underscoring that it's the USD weakness that's driving price action (GBP/JPY, GBP/EUR still well below recent highs).

• The USD Index has broken to another pullback low today of 103.329 - this cements the erasure of the post-election gains - and exposes 102.521 in the process. JOLTS jobs data will be the next point of focus here, with markets looking to gauge higher quality insight into the jobs market after Friday's NFP.
• We note that options markets are isolating EUR, JPY, SEK and NOK as the most sensitive currencies to tomorrow's US CPI print - with overnight implied adding over 7 points in the lead-up to tomorrow's print. Given outsized spot gains for all four currencies against the USD, markets may be increasingly cognizant of reversal risks, particularly as EUR net positioning shifts much closer to neutral after maintaining a sizeable net short for ~three months.

The Bank of Spain has revised its 2025 GDP growth and inflation projections higher in its latest quarterly report.

• 2025 GDP growth is now expected at 2.7%, up from a previous forecast of 2.5% in December. This reflects the stronger-than-expected Q4 2024 GDP print (0.8% Q/Q) and signs of a stronger path for household incomes than previously assumed (which may have a positive impact on consumption).
• 2026 and 2027 GDP projections were unchanged at 1.9% and 1.7% respectively.
• The 2025 headline inflation projection was revised up to 2.5% (vs 2.1% in the December round), largely reflecting higher energy prices. Government measures to limit public transport price increases provide some offset.
• The forecasts “do not explicitly incorporate the possible impact on activity of the higher levels of uncertainty and geopolitical tensions”…“Nor do they incorporate the increase in tariffs by the United States on imports from Mexico, Canada and the EU, a matter about which considerable uncertainty persists”. As such, growth risks are tilted to the downside, and inflation risks slightly to the upside.
• The BOS notes that “it will be important to continue monitoring up to the point where Spanish economic activity can continue to maintain a rate of growth significantly superior to that of two of its main commercial partners -France and Germany-, as well as the evolution of private investment, which shows a particularly weak recovery path”. 

The Paris Defence and Strategy Forum 2025 is underway, with defence ministers and military chiefs from across the West meeting in the French capital for the three-day event. While officials will deliver public remarks, the most notable event is set to come today when French President Emmanuel Macron addresses on the sidelines of the forum ~30 defence chiefs regarding the prospect of peacekeeping forces being deployed to Ukraine in the event of any ceasefire. Macron is due to speak ~1730CET (1130ET, 1630GMT). 

• Mujtaba Rahman at Eurasia Group posts on X: "The meeting is intended to explore the nature and limits of a “reassurance” force of around 30,000 troops proposed by France and Britain to secure any ceasefire or peace agreement between Russia and Ukraine. Moscow has rejected the idea. Not all countries attending today’s talks have offered to send troops but all have indicated that they may take part in some way (ie financial or logistical support)."
• Bloomberg reported earlier comments from Western security officials claiming that Russian President Vladimir Putin's 'maximalist' position means he knows Ukraine and Europe will not accept his conditions and that he is content to continue the war in its current complexion.
• UK PM Sir Keir Starmer has convened a national leaders' videoconference on Saturday, 15 March, for a second meeting of the unofficial 'coalition of the willing' looking to provide peacekeepers or further support for Ukraine.