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GBP: Goldman Sachs Recommend Long GBP/CHF, Targeting 1.16

GBP
  • In a world where the Fed might need to cut rates faster and deeper to stabilize growth, Switzerland could need to adjust their policy strategies to offset the impact from safe-haven currency appreciation.
  • While they cannot be sure, some evidence suggests the SNB already intervened to curb Franc strength during market turbulence last week. However, more persistent growth fears could warrant a bigger change in policy strategy. SNB would need to find a more permanent solution to curb currency appreciation.
  • Their economists look for the SNB to keep rates steady, but if the environment shifts, some precautionary rate cuts now look more attractive.
  • For that reason, they think CHF looks less attractive as a portfolio hedge, and instead think CHF funding is a good way to position with policy support for more benign outcomes; they recommend that investors go long GBP/CHF with a target of 1.16 and a stop of 1.10.
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