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Macro and Vol Commentary

Swissie has firmed in recent weeks as the greenback finds support amid a comparatively hawkish Fed, but with Macro risks mounting, can this be sustained?

Switzerland Economic Data

  • Manufacturing PMI fell in October to 65.4, a decline from 68.1 the month prior; this was attributed to a decrease in production, orders, purchasing volume, employment, and delivery times.
    • Sales continue to rise along with purchasing prices.
    • The PMI has been expansionary all year and peaked in July above 71.
  • Consumer confidence for Q4 was 3.8, down from 7.8 the previous quarter. We expect this to impact retail sales moderately in Q4 despite the more robust reading for September at 2.5% Y/Y. 
  • Inflation remains low compared to other economies, with CPI at 1.2% Y/Y and 0.3% M/M. CPI core was 0.6% Y/Y for October. 
    • Inflationary pressures are rising across the globe, and this can be seen by the higher producer & import prices reaching 5.1% Y/Y in October. 
    • The trend for inflation is on the upside, and we continue to watch the data for any indication that the central bank will change its policy. 
  • Industrial output growth declined and was 7.3% in Q3, down from 15.7% the previous quarter. Construction data has also declined, which could be due to higher prices impacting end-users decisions. 
  • Employment has been improving. The unemployment rate is at 2.5%, with the seasonally adjusted rate at 2.7%. 
  • GDP was strong in Q2 at 7.7%, but this will normalise in Q3 and Q4; this can be seen by the leading indicators, which are high but starting to decline, suggesting a normalisation of the economy.
    • Economic momentum has slowed, but we expect GDP to be 3% in 2021 and a similar rate for 2022.
    • The downside to GDP can be attributed to consumer-led industries, which are less dynamic and slower to recover.
    • The economy has returned to pre-pandemic levels as they managed COVID a lot better than European neighbours; however, large amounts of slack in the economy will take longer to recover. 
  • Total sight deposits have increased consistently over the last few months, 719bn as of November 12th. Domestic sight deposits have reached 644.1bn.
  • Imports are falling and were -4.4% M/M in October, with exports declining -1.5% M/M. This could indicate a weaker consumer environment as prices rise and consumer confidence drops, reducing the propensity to import.
  • The balance of payments in Q2 2021 was CHF10.5bn, primary income net CHF-8bn and secondary income net at CHF-3.4bn. 
    • External debt totalled CHF2,140.6bn; this increased from Q1, where external debt stood at CHF2,118.5bn. 
  • The public finance deficit is estimated to be lower in 2021 than in 2020 at 2.2% compared to 2.8%. 


  • Interest rates are at -0.75%, and this will remain low for the foreseeable future.
  • The spread between swiss 10yr yields and other European bonds has widened marginally as the Swiss 10yr is negative and at -0.2% at writing. 
  • The correlations between the Swiss and German bonds should see the yield rally in 2022, but we expect the central bank to try and weaken the currency against the EUR.
  • The SNB’s total FX reserves have continued to climb, which is a huge tool for them and has reached CHF965,459.3m; they hold $386,671.62m. 
  • The currency will remain strong, and if domestic bond yields firm, we could see this cause the currency to strengthen, but they are willing to intervene with the exchange rate. 

The Swiss economy has firmed and will continue to do so, but a more normal growth rate, the FX reserves are key to the SNB, and we expect them to look to weaken the currency against the euro, which is not a problem most central banks have. We do not expect a change in the interest rate in the next year, but the divergence in monetary policy between the US and Switzerland. The Fed are more hawkish and will continue to be so. The dollar is also firming due to this, in conjunction with the boost from the higher yields than other major economies. As a result, we expect USDCHF to be firm. Even though macro problems are appearing, in our opinion, the dollar will remain well bid. We favour owning USDCHF with a near term target of 0.95, and if we see the trend of a stronger dollar in 2022, bulls may have 1 in their sights. 

Volatility Commentary

Looking into USDCHF vols this year, we have seen USDCHF vol realise either in line or slightly higher than implied and with recent European Covid restrictions and a newly detected Covid variant driving a pick up in macro vols with USDCHF being no exception. As a result, we are generally in favour of holding slight long vol/gamma positions in the event of further lockdowns which would further drive higher realised and implied volatilities. As mentioned above we’re favouring positions benefitting from USDCHF appreciation with divergences between Fed and SNB policies.

USDCHF 1-month Realised and Implied Volatility

USDCHF Trade Idea 

  • Buy 3-month EKI Call option with strike 0.9350 and 0.9600 KI barrier in 10m USD Notional for circa 51k USD
  • Note Vanilla equivalent cost is circa 77k USD

Positioning Charts

USDBRL NDO Positioning Data 09/11/2021 - 16/11/2021

Options in the week of November 23rd showed little pattern. We saw more out of the money puts traded with expiries in December. The notional values are greater than near term options. The momentum for the spot is on the upside but there is little upside cover above 5.70 and any cover above 5.50 the national values are low meaning there is little conviction.  


USDBRL NDO Positioning Data 16/11/2021 - 23/11/2021

USDCNY Vanilla Positioning Data 09/11/2021 - 16/11/2021

There is a moderate downside bias to the options executed for USDCNY in the week of 23rd November. Volumes were lower last week but there is a cluster of options due for expiry in the coming days. As we move into 2022 the range widens and there is little trend. However, there are more put options due to expire, with downside cover to 6.20. Call options have an upside range of 6.70 but the notional value is small. We expect the trend to favour the downside in the near term. 

USDCNY Vanilla Positioning Data 16/11/2021 - 23/11/2021

USDCHF Vanilla Positioning Data 23/09/2021 - 23/10/2021

We saw spot weaken in October and this caused a large shift lower in the strike rates for options. The range for options was largely the same in the week to 23rd of November. There were more call options executed than puts, and this can be attributed to the rally in spot market as traders. There is cover to 0.95 and if the market continues to rally we expect to see a rush to cover towards 0.97. On the downside, the is ample cover on the downside with puts for expiry in December down to 0.89. We expect the market to rally in the near term towards 0.95.


USDCHF Vanilla Positioning Data 23/10/2021 - 23/11/2021

Charts and Tables

FX Expiries

Volatility Grid

Historical Spot FX Volatility (30D Rolling)

FX Matrix (today)

Weekly Change

Key Events & Releases

Technical Analysis

JP Morgan Global FX Volatility 

The index rallied sharply in the last couple of sessions, breaching resistance at 8.00 and 8.50, and is now trading at November 2020 levels. The stochastics are diverging on the upside, with %K now in the overbought, and the MACD is positive and diverging. To confirm the outlook of higher prices, the index needs to break above the 61.8% fib level at 8.54 and then resistance at 8.65. Alternatively, if the index finds resistance at 8.54, the recent trend can reverse down to 8.20 and 50% fib level at 8.13. The appetite seems to have softened around the near term resistance, and we could see a change of trend, but indicators point to further upside pressures in the meantime.

Dollar Index 

The dollar index has been softening in recent sessions after finding resistance at 96.93 and has been trading mostly sideways today, supported by 50 MA. The stochastics have, however, converged on the upside, confirming a strong buying pressure, and the MACD is negative and converging. If weakness prevails, we could see prices break below the 50 MA at 96.25 level to test 96.00. On the upside, if support above this level holds firm, this could trigger gains through 96.50 and target 96.93. The most recent indicators suggest we could see the index rise further in the near term, but the index needs to breach the near term resistance to confirm this.


The pair has gained ground in November, breaching 0.93 levels to find resistance at 0.9374. In the last couple of days, this level has been robust, and the pair fell down to find support at 100 MA. The stochastics have converged on the upside and now edging out of the oversold, and the MACD diff is negative and converging, signalling a change of momentum in the near term. The gains have not been well bid, and the most recent candles struggled to recover after the sell-off, indicating momentum on the downside. If support at 100 MA at 0.9248 is broken, we could see the pair edge lower through the 200 MA level to 0.9212, and consequently, the 0.9200 level. On the upside, if support at these levels holds firm, it could trigger gains back to 50 MA at 0.9298 and 0.9374– recent highs. The indicators and support at 100 MA to a change of momentum in the near term, and we expect the pair to strengthen in the near term. 



This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

Please contact the author should you require a copy of any previous reports for comparative purposes. Furthermore, the information in this report has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Data in this report has been sourced from Bloomberg unless otherwise stated. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.

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