Swiss Franc: Weak performance tied to carry and Gold – TD Securities

TD Securities strategists argue that the Swiss Franc’s (CHF) underperformance since the February 2026 Iran shock reflects both low-yield carry dynamics and sensitivity to Gold prices. With the Swiss National Bank (SNB) expected to keep policy on hold and sight deposits muted, they see global rate paths and commodities as key drivers for Swiss Franc (CHF) crosses, limiting further sustained CHF weakness.

SNB on hold leaves CHF to globals

"Since the Iran shock at the end of February 2026, CHF has become one of the worst-performing global currencies along with SEK. Risk-off sentiment only supported CHF briefly in the first half of March, before a downtrend ensued."

"CHF has always been a low-yielding currency, but FX carry did not always drive CHF weaker. In fact, during the last global rate hiking cycle of 2022, when rate differential widened in favor of global currencies against CHF, CHF broadly rallied on the back of falling SNB sight deposits. Sight deposits have shown a muted change in 2026, which has allowed macro variables to dictate the direction of EUR/CHF. With the SNB likely to keep the policy rate on hold in the foreseeable future, rate paths for global central banks will matter more for CHF-crosses."

"CHF has been one of the worst-performing global currencies since the Iran shock in 2026. While CHF bears have been awakened with FX market participants largely attributing CHF weakness to carry, we find falling gold price also matters. The EUR/CHF rally could end if ECB pauses rate hikes after September; falling gold prices will be a prerequisite for CHF to stay weak."

"In the scenario that the ECB keeps policy rate on hold after one more hike in September, the EU-SZ rate differential would likely see its peak, and further gold selloff will be needed for the CHF to stay weak, in our view. In commodities, our research suggests gold prices could fall to $3,900/oz in the near-term before recovering into a new uptrend. As we see limited scope for a prolonged global rate hiking cycle and only modest gold price downside, our FX forecast has EUR/CHF staying around 0.93 into year-end 2026."