Pound Acting Well On Risk — But Will the Swiss Outshine?

From Jack Crooks, Editor of World Currency Options:

What's Happening:

The ramp-up in credit risk in the market is huge. The pound is acting well this week on the back of market risk. But, in the recent past the Swiss franc has been the star currency that has acted very well on risk, for two reasons:

What I Say:

1) Switzerland still hanging on to some reservoir of safe haven status in times of global trouble (and despite severing its gold link to its currency, it still has a larger gold backing than any other of the major currencies).

2) The Swiss are likely still benefiting from European carry-trade status — Because of Swiss low interest rates, many actors across Europe funded a lot of risk asset investments and real estate (now becoming a risky asset). As they reduce this leverage and pay back Swiss denominated loans, the Swiss franc benefits accordingly.

Above is a daily chart of the British pound — Swiss franc cross rate. I believe the Swiss should outshine the pound on this ramp-up in risk. If it does, we could see a sharp break lower out of this narrowing range.

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