Goldman Sachs: Taking Profit On Europe RV Trades

Goldman Sachs note that they are closing both of their "Q1 European relative value trade recommendations, long NOK/SEK and long GBP/CHF, after spot returns of 2.6% and 2.8%, respectively. While both have retraced significantly over the last week, we think that is mostly related to investors trimming winning positions rather than to negative fundamental developments. That said, these trades were designed to get exposure to reopening momentum and receding tail risks in Europe, as both NOK and GBP tend to outperform when global growth is re-rated higher, and we think the narrative is shifting towards a European rebound, where these currencies are less reliable performers. Turning to the funding legs, we still think the low inflation outlook in Sweden will constrain SEK appreciation, but its strong link to the European growth cycle could overshadow those concerns in a meaningful Euro upswing. On the other hand, we think that CHF should resume its depreciation trend as European vaccinations accelerate even if the duration selloff is over; we hold our 12-month EUR/CHF forecast at CHF1.20."