/CHF: Goldman Sachs: Tightening Stops As Old Risks Resurface

Goldman Sachs note that they "have recommended investors go long GBP/CHF to position for receding tail risks in Europe and the anticipated recovery in the UK economy, which is particularly exposed to high-contact industries that have been subject to severe mitigation measures. While we still hold this view and think the trade has further to run, a number of familiar sources of volatility have become more prominent in recent weeks, requiring investors to be more vigilant. First and foremost, CHF acts primarily as a European safe haven currency, so the ripples from the removal of the Turkish central bank governor and ongoing vaccination difficulties in the Euro area have moderated our near-term bearish outlook on the Franc. Investors should also be mindful that Sterling is a relatively high-beta G10 cross and sensitive to equity prices, so it is not surprising to see it struggle while risky assets digest the duration selloff. To reflect these changing circumstances, we are maintaining our long GBP/CHF trade recommendation, with a target of CHF1.33, but tightening the stop to CHF1.27, which would be about a 50% drawdown from current spot to the entry point. We still think this trade is pointed in the right direction for our macro views, but we have entered choppier waters."