Chris Turner at ING highlights that last year’s US Dollar (USD) debasement trade favoured the Swiss Franc (CHF), Gold and bitcoin, but a more hawkish Fed view could reverse this. He argues Fed-driven Dollar strength is best expressed versus the Swiss Franc, with further losses in Gold and bitcoin potentially pushing USD/CHF through 0.7910/25 resistance towards 0.80.

Swiss Franc faces renewed Dollar pressure

"EUR/CHF has been drifting higher this week. That is probably a function of the global sell-off at the short end of the rates curve, where EUR/CHF is effectively driven by the ups and downs of short-dated EUR swap rates."

"The rationale here is that the Swiss National Bank will not be adjusting its zero interest rate policy anytime soon and thus short-dated swap differentials are only driven from the euro side."

"On Monday, we also said that we felt any Fed-driven dollar strength would be best played out against the low-yielding yen and Swiss franc. Last year it looked like the Swiss franc had been the big beneficiary, along with gold and bitcoin, of the dollar debasement thesis."

"If, however, the market starts to have greater confidence that the Fed will hike after all, those debasement trades could be further unwound."

"Keep watch on gold and bitcoin. Any further losses there could see pressure build for USD/CHF to break through resistance at 0.7910/25 in a move to test 0.80."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)