Swiss Franc Weakness Linked to Low-Yield Carry and Gold Price Sensitivity

The Swiss Franc (CHF) has been one of the worst-performing global currencies since the Iran shock in February 2026, according to TD Securities strategists. They argue that CHF's underperformance can be attributed to both low-yield carry dynamics and sensitivity to gold prices.

With the Swiss National Bank (SNB) expected to keep policy on hold, TD Securities believes global rate paths and commodities will drive CHF crosses. This means that further sustained CHF weakness is unlikely, as macro variables dictate the direction of EUR/CHF.

The strategists point out that CHF has always been a low-yielding currency, but FX carry did not always result in CHF weakening. In fact, during the last global rate hiking cycle in 2022, when rate differentials widened in favor of global currencies against CHF, CHF rallied on falling SNB sight deposits.

TD Securities expects the ECB to keep policy rates on hold after one more hike in September, which would see the EU-SZ rate differential peak. They also predict that gold prices could fall to $3,900/oz in the near-term before recovering into a new uptrend. As a result, they forecast EUR/CHF to stay around 0.93 by year-end 2026.