Goldman Sachs: Opportunity To Reengage On Pullback

Goldman Sachs note that they "continue to recommend that investors go long EUR/CHF with a target of CHF1.14. After some recent gains, the pair retreated on Friday. We think this is likely due to a partial unwind of the "earlier Fed taper" trade, since the U.S. payrolls report probably did not meet the bar for speeding up that process. In our view, this represents an opportunity to reengage in the trade, which still offers a strong combination of attractive valuation and compelling macro catalysts. We still think that a reduction in European tail risks and the reopening-led recovery should weigh on the Franc by reducing the safe-haven premium and pushing portfolio flows into European equities, while also giving the ECB room to sound more optimistic on the outlook and more concretely reduce the pace of purchases even after the summer supply lull. In addition, the more uncertain tactical USD outlook should lead investors to diversify their funding currencies in pro-cyclical trades. CHF should be a prime candidate, as underscored by the release from the SNB that revealed it was mostly on the sidelines for the Q1 selloff (buying just CHF0.3bn of foreign currency during in the quarter). The main risk to this view is that the Delta variant further delays the economic reopening, but for now we think that high vaccination rates should reduce the need for economic disruption."