📝Holding Short EUR/CHF On EU Recovery Undershoot: J.P. Morgan FX Strategy

The EUR/CHF short was originally intended to capture

weak regional growth, net positive CHF flows, and tariff

risks. The position has been challenged by data reflecting a

shift in the Swiss National Bank˖s FX intervention stance, as

well as last week˖s material undershoot on Swiss inflation.

Stronger European PMIs this week also challenge the

trade via the potential for safe haven outflows from CHF

as regional growth improves. However, there is more nuance

there: growth is benefitting partly from the DM lower yields

seen in Q4. Therefore, the current uptrend in DM yields has

the potential to cut off the European recovery. We'd add that one

of the core engines of growth in Europe, namely German

manufacturing, saw the PMI materially undershoot and call

into question the broader recovery. For these reasons, we opt

to keep our EUR/CHF short. - J.P. Morgan FX Strategy