USD/CHF: Risk sentiment to continue to be key driver in CHF - CitiBank

Analysts at Citibank, point out that if US-China trade tensions show sign of resolve and market risk recedes, funds may flow out of safe-haven CHF.

Key Quotes:

“Eurozone geopolitical risk elevated amid Italy budget issues, triggering funds to flow into safe-haven CHF. Amid recent CHF appreciation, market expected that the SNB may cut rates further to slowdown CHF appreciation.”

“Given its attractiveness as a funding currency, CFTC data shows a sizeable net short positioning amongst the speculative community built YTD and so we don’t envisage material CHF weakness.”

“USD/CHF was restrained by 1.0073 resistance and may test lower to 0.9706-0.9807 upon consolidation.”

“Unless Fed officials are comfortable with the domestic outlook and the outcome of trade negotiations, they will likely feel compelled to deliver rate cuts. If payroll growth comes in sub-100K for a second month in June (released July 5), it would not be surprising to see the Fed cut rates in July, which may undermine the USD.”