Easing geopolitical tensions have led to a partial decline in the Swiss franc (CHF) safe-haven premium, sending EUR/CHF slowly moving higher, report Societe Generale’s FX analysts Olivier Körber and Kit Jacques.
CHF weakens despite weak performance of EUR/USD
“Safe-havens relax and take profits. As geopolitical jitters ease, EUR/CHF has risen to higher levels despite EUR/USD’s weakness since the Christmas peak at 1.18, indicating CHF’s safe-haven bid is gradually tapering off. Due to Norway’s high rates, pairing CHF shorts with NOK longs provides attractive carry.”
“Switzerland’s PMI miss confirms downside risks. Downside risks to Switzerland’s economy have deepened with the December manufacturing PMI falling to 45.8 (well below the most pessimistic forecast of 49). Combined with a 3Q GDP contraction, this reinforces economic fragility and weakens the CHF’s defensive appeal.”
