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💱 Swiss Franc Continues to Be Detached From Risk: Cable FX Macro

  • The Swiss franc is extending gains vs its G10 peers, the currency leads the group so far this year. Risk has seen a bid over this period of time, which breaks the historic RoRo correlation between CHF and market sentiment

  • EUR/CHF, a commonly known proxy for EU risk, is now trading lower despite the rise in the European equity benchmark index. The divergence extended since early January, and a spread of the two is now at the widest level in a year. We avoid adopting a relative comparison with USD/CHF as the euro and dollar tend to hold opposite betas to risk

  • The shift is more evident as we look at the long-term correlation between EUR/CHF and SX5E Index at about 50% just 9 months ago, meaning, the two would move alike. Early April, the correlation turned negative for the first time since February 2022

  • We have seen 6 euro-franc and risk negative long-term correlation episodes over the last 10-years, only half of them were longer than 2-months, the longest period was 7 months running from 2015 to 2016

  • Despite the positive sentiment in risk, SNB monetary policy, a relatively stronger eurozone, and investor positioning do not support a weaker franc


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