EUR/CHF: Swiss franc looking like a key safe-haven trade for Europe

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<li>European stocks drop to their lowest level in more than six months</li>
<li>Swiss franc stronger against most European counterparts (NOK and SEK firmer)</li>
<li>Overnight index swaps still not</li>
</ul>
<p>A global bond market selloff European equities sharply lower and triggered some safe-haven flows towards the Swiss franc.  The EUR/CHF daily chart shows prices have tentatively fallen towards the lowest levels since September 21st.  Risk aversion is clearly in place given US lawmakers were able to tentatively avoid a shutdown but stocks are still selling off.</p>
<p>Earlier in London, the final PMI readings showed Germany and France heavily remain in contraction territory.  German manufacturing activity posted its 15 straight contraction, but did deliver a 3-month high.  France manufacturing PMI posted its 8th straight contraction and worst reading since May 2020.</p>
<p>The global growth outlook seems poised to deteriorate and that should lead to gloomier prospects for Europe.  As soft landing hopes disappear in the US, the chances of a de-risking moment grow.  If European bond yields continue to rise, the Swiss franc should outperform in the short-term.</p>
<p>EUR/CHF Daily Chart</p>
<p><a href="https://www.marketpulse.com/wp-content/uploads/2023/10/EURCHF_2023-10-02_14-55-47.png"><img loading="lazy" class="alignnone size-large wp-image-807885" src="https://www.marketpulse.com/wp-content/uploads/2023/10/EURCHF_2023-10-02_14-55-47-1024×522.png" alt="" width="700" height="357" srcset="https://www.marketpulse.com/wp-content/uploads/2023/10/EURCHF_2023-10-02_14-55-47-1024×522.png 1024w, https://www.marketpulse.com/wp-content/uploads/2023/10/EURCHF_2023-10-02_14-55-47-300×153.png 300w, https://www.marketpulse.com/wp-content/uploads/2023/10/EURCHF_2023-10-02_14-55-47-768×391.png 768w, https://www.marketpulse.com/wp-content/uploads/2023/10/EURCHF_2023-10-02_14-55-47-1536×783.png 1536w, https://www.marketpulse.com/wp-content/uploads/2023/10/EURCHF_2023-10-02_14-55-47.png 1597w" sizes="(max-width: 700px) 100vw, 700px" /></a></p>
<p>As financial conditions continue to get uglier across Europe and that is starting to lead to more safe-haven flows towards the franc.  Short-term downside seems like it could target the 0.9500 region.  If bearish momentum remains in place, price action could fall towards the 0.9265 level which is the 78.6% Fibonacci retracement of the 2015 low to 2018 high move.</p>