When AI crashes, the franc stands to gain
FXF•SNB intervention could limit appreciation
Chambers, however, noted that there would likely be push back from the SNB against any upward pressure on the franc, with the central bank having communicated its willingness to intervene in FX markets in recent months.
"But if there were a major sell-off in global equity markets as we are predicting, history suggests that FX intervention would only limit the amount of franc appreciation rather than prevent it altogether."
History points to franc gains in equity drawdowns
"Looking at how the franc has performed during bear markets in U.S. equities tells the same story. Of the ten occasions since 1980 when the S&P 500 experienced a drawdown of at least 20% (as we are forecasting next year), the franc strengthened against the euro in eight of those," he said.
"And in the dotcom bubble, which is the most obvious comparison to the current situation, the franc strengthened by around 3.5% against the euro."
Swiss franc could strengthen as risk appetite fades
The strength of the Swiss franc could be back at the top of the markets agenda next year - Capital Economics expects it to strengthen by around 3% against the euro by the end of 2027.
Global risk appetite is expected to wane next year as the AI bubble is projected to burst then, which in turn should increase demand for safe-haven currencies like the franc, assistant economist Harry Chambers said in a note, adding that this would be consistent with previous crises.
