Synopsis:

Nomura isn’t outright bearish on the Swiss franc (CHF) yet but is looking for tactical opportunities to express a bearish CHF view, particularly against USD, EUR, and JPY. A potential turn in US economic sentiment or softer Swiss inflation could trigger CHF weakness.

Key Points:

• CHF has held up despite improved risk sentiment:
  The franc remains stubbornly strong even as global market risk appetite has improved, suggesting it is still viewed as a recession hedge.

• Potential USD/CHF squeeze ahead:
  If market fears about a US recession subside, CHF could face a sharp depreciation, similar to what was recently observed in USD/JPY.

• Domestic inflation data in focus:
  April Swiss CPI, due next week, is expected to slow slightly (headline: 0.2% YoY, core: 0.8% YoY). A further deceleration may raise deflation concerns and prompt the SNB to push back against CHF strength.

• SNB policy implications:
  Continued CHF appreciation alongside falling inflation may compel the Swiss National Bank to take action, including possibly easing further or intervening in FX markets.

Conclusion:

While Nomura isn’t aggressively short CHF at present, the balance of risks points toward CHF downside, especially if US economic fears recede or Swiss inflation weakens further. They are watching for tactical entries to sell CHF versus USD, EUR, or JPY in the coming weeks.