Goldman Sachs: Go Long On Firming European Growth

Goldman Sachs note that they have been "recommending that investors position for a European rebound as the economy starts to reopen from relatively strict lockdowns. Euro crosses have firmed, but mostly on the back of a weaker U.S. dollar after the duration selloff ran out of steam. With the recovery now underway, we think investors should lean into this theme by going long EUR/CHF. Given CHF's usual role as a European safe haven, its recent strength contrasts with diminishing global tail risks, and we think it is too early for events like the French elections to have an effect. In our view, recent CHF appreciation is likely more technical in nature, as it tends to be a common funding currency to position for higher yields. However, rate differentials do not normally have a long-term impact on this cross, recent reserve indicators suggest the SNB is still resisting currency appreciation, and we think the drivers should shift towards the brighter economic outlook. We picture a similar dynamic to 2017, when improving growth momentum coincided with strong equity portfolio flows into the Euro area and helped push EUR/CHF significantly higher. We recommend investors take advantage of what looks like an attractive entry point and go long EUR/CHF with a target of CHF1.14."