FX Daily: Swiss franc becomes favourite funding currency
At a Glance
The desk argues that the Swiss franc (CHF) is poised to become the favored funding currency amid a hawkish shift anticipated from the Federal Reserve at the upcoming FOMC meeting. Citing the source commentary, the dollar remains supported as traders adjust positions, with a near 40% probability priced for a rate hike. Notably, the Swiss National Bank's commitment to a 0.00% policy rate through 2027 further reinforces the bullish outlook for the CHF. This dynamic places USD/CHF as a potential leader if the Fed signals a stronger tightening path. Per the full note source, the dollar's resilience appears to cap EUR/USD near current levels as traders watch for confirmations from upcoming data releases.
Key Takeaways
- 01The CHF is gaining favor as a funding currency amidst projected dollar strength.
- 02Market anticipates a hawkish FOMC meeting, influencing expectations and positioning.
- 03Consensus targets for USD/CHF largely remain below current levels, indicating potential for further upside.
- 04Position adjustments leading up to the Fed meeting may heighten volatility.
Full Analysis
What the desk is arguing
The desk posits that the Swiss franc is likely to emerge as the preferred funding currency following dovish signals from the Swiss National Bank. The stance of the Fed hints at increasing short-term dollar demand, positioning USD/CHF to capitalize on this trend, as stated in the source. A hawkish Fed, especially given the shifting rate expectations, creates a supportive backdrop for the dollar, while the CHF's status as a stable funding source remains intact.
The current market perception is reflected in the growing probability of a Fed hike, with a cited 40% chance according to market pricing. In this context, we also need to factor in market positioning ahead of the FOMC meeting, where potential adjustments could lead to increased volatility in USD/CHF.
Where it sits in our coverage
Our current consensus for USD/CHF places it at 0.8100, with a range spanning from 0.7600 to 0.8200. Notably, firms like goldman and nomura have set their Dec-26 targets at 0.7600 and 0.7800, respectively, which reflects a noteworthy alignment around the more cautious end of projections.
This view aligns closely with the broader cross-firm consensus, with most forecasts hovering around the median target level. Currently, our target sits slightly above the middle of the range, indicating an expectation for higher volatility in USD/CHF trading potentially incentivized by Fed announcements.
How other firms see it
Firms such as morganstanley and deutschebank share a bullish outlook for the Swiss franc, anticipating levels around 0.7900 for March 2026. Conversely, firmly more conservative projections from bofa position the CHF lower at 0.8000, suggesting a divergence in outlook.
The USD/CHF dynamics will mirror sentiments in EUR/USD as the ECB also contemplates its own rate path, with additional influences naturally stemming from broader market reactions to the Fed's decisions.
Market Implications
Traders should monitor USD/CHF levels around 0.8100, particularly in the context of potential Fed hawkishness. Additionally, watch for any shifts in positioning ahead of the next FOMC meeting, which could signal volatility. The CAD may also provide insights as related data comes out.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
UOB | Bullish | 1.1565 |
From the original
Articles FX Daily: Swiss franc becomes favourite funding currency Published 07:30 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar remains bid as investors position for a hawkish FOMC tomorrow, if not a rate hike. And source stories that
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