(11 SEPTEMBER 2018)DAILY MARKET BRIEF 1:Swiss franc eases in risk-off

After falling to a 13-month last Friday, EUR/CHF rose 1% yesterday and continued to grind higher this morning amid improving risk sentiment. Indeed, risk aversion has decreased substantially lately amid positive development in the UK. Brexit concerns eased after Michel Barnier, the European Union’s chief Brexit negotiator, said it is realistic to expect a Brexit deal within the next six or eight weeks. Consequently, the pound surged 1.30 against the greenback, while GBP/CHF added 1.80% to 1.2740.

Nevertheless, the ongoing trade war between the US and China will keep investors on their toes as Donald Trump warned he was ready to roll out tariffs on $267 billion worth of Chinese exports to the US. For now, it seems that market participants are too not worried as risky assets recovered in the European morning. EM currencies were better bid, the Japanese yen, the Swiss franc and the US dollar slid, while the euro and high quality commodity currencies extended gains.

Given the high uncertainty surrounding the outcome of the US-China trade war, caution is still warranted. Chances are good this risk rally will be short-lived.

By Arnaud Masset