By the standards of the Swiss Franc, crosses including EURCHF, GBPCHF, and USDCHF are moving alarmingly fast. The sell off the in Franc is not necessarily bad news for either the aggregate Swiss population nor the rest of the world. Alongside the push towards normalisation in real economies and markets alike, the still exorbitantly high prices of defensive assets stands to undermine signals of a durable and credible recovery. The Swiss Franc is one such defensive asset that investors hold onto to ride out troubling economic and financial conditions. With the EURCHF pair having soared to one year highs, it now faces considerable technical resistance levels. In order to demonstrate concrete confidence in the recovery, Swissy and other defensive assets should take out current support levels and continue their decline.
The weakening in the past few days in CHF has been violent. On Tuesday alone CHF gained in excess of one cent on its major crosses. This price move has prevailed against a backdrop of rising inflation expectations despite major central bank governors’ best efforts and further outperformance in the commodity space. As a defensive asset, the Franc usually sees investors hold short open positions against it during normal and good times. Throughout the pandemic, market participants particularly in the speculative space have held long positions with considerable open market interest. This market positioning appears to be increasingly unstable and in line with the gains already made this week could see a short squeeze.
The Franc also attracts one of the lowest interest rates in the G10 currency space with little sign of changing anytime soon. As the market opens up and risk appetite develops further, the Franc could also earn for itself the status as the go to funding currency to fulfil the market’s rediscovered appetite for the carry trade. This could put further downward pressure on CHF with a sell off towards 1.15 versus the Euro plausible by year end. It is the improving conditions globally with the vaccination trade and Draghi’s technocratic government in Italy that are providing the foundations for a weaker Franc in the present market. Any adverse shocks that disturb the more sanguine outlook than we have been used to in the past 12 months could upset this trajectory.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Friday night US Markets
Humphrey Percy
Mon 13 Oct 2025
Friday night US Markets There was an element of the US stock market temporarily running out of oxygen at the heady heights that it had reached and looking for an excuse to take profits/sell. That excuse was provided in spades by POTUS who pronounced that he would implement much higher tariffs against China. That was […]
Daily Brief – China and the USA
Humphrey Percy
Wed 15 Oct 2025
China and the USA What prompted POTUS to escalate the trade war last week? Before answering that, it is worth a refresh on the current state of play: US tariffs on China average 58% and China on the US 33%, and the next cliffhanger date is November 10, after which the current threat is for […]
Daily Brief – EU Chamber of Commerce China
Humphrey Percy
Fri 26 Sep 2025
EU Chamber of Commerce China Chamber Supremo Jens Eskelund gave a speech this week which made it all too apparent that China is directing its trade exports away from tariff heavy USA to tariff light EU. At the same time, China is making it much harder for foreign businesses to operate in China. That imbalance […]
