2026-01-21 09:02:00
Amid the geopolitical risks and negative risk mood, the Swiss franc is one of the better performers in the major currencies space this week. The flows are also helped by the fact that the US dollar and Japanese yen have their own set of problems of course. The former is dealing with outflows amid more erratic administrative policies while the latter is suffering from the Takaichi trade selloff.
That’s leaving the franc as the only real safe haven in the major currencies space in sticking true to its nature amid a more risk-off environment.
EUR/CHF opened with a gap down this week and even with a slight bounce today, it is still down 0.4% on the week itself. The decline is relatively measured as traders and investors are also diversifying into precious metals amid the fiat currency debasement narrative. In any case, the pair continues to eye the crucial 0.9200 level but will we reach that point with all that is going on now?
EUR/CHF daily chart
If we are to see Trump double down on Greenland and continue to push a hard stance on his threats, that should keep the pair leaning towards the downside. However, the SNB is also likely to draw a hard line closer to 0.9200 in preventing a major strengthening of the franc at this stage.
They need to manage things on the inflation front, or should I say deflation, and a stronger currency is not a welcome development. The central bank wants to steer clear from negative interest rate policy for as long as they can do so. But at the same time, that thinking is a double-edged sword in the sense that it keeps the franc currency in a firmer position amid that outlook.
That being said, one can argue that even with a push to negative rates, it’s not one to really take much of the pressure away from the currency’s fundamental outlook. With the dollar and yen stuck in the mud and geopolitical and economic tensions intensifying globally, not to mention with fiscal risks factoring in, that is only going to keep the franc as the preferred haven currency for the foreseeable future.
The only real question is how much can the SNB tolerate this and if they will keep wanting to hold the line at the 0.9200 level. The best they can hope for now is that geopolitical tensions will eventually pass and that will alleviate some pressure from currency gains. But as seen in 2025, the conversation about 0.9200 is one that don’t seem to be going away any time soon.
But with the SNB also providing somewhat of a floor, the downside appears to be more limited as well.
Goldman Sachs is out with a note this week that says:
“We expect EUR/CHF to remain broadly rangebound In the coming months, with a gradual drift higher to 0.95 to year-end.”
That likely reflects the thinking that the Swiss central bank will keep any downside pressures in check while retaining its monetary policy stance. And as geopolitical tensions fade eventually, that will ease flows into the franc and provide some room to come up for air in EUR/CHF.
