The potential for political turmoil in European elections this year is keeping the Swiss National Bank alert for threats to the franc, according to SNB chair Thomas Jordan.

Citing elections in Germany and France, possible instability in Italy, and questions about Brexit and U.S. trade policy under President Donald Trump, the SNB chief warned that “such periods of increased political uncertainty are always delicate for us because Switzerland is increasingly viewed as a safe haven.”

A surge in populism ahead of the elections in Europe, as well as the U.K. and U.S.-related risks, have pushed the franc up 2.5 pct against the euro in the past six months. The currency has averaged above 1.07 per euro this year, compared with less than 1.09 in 2016.

Speaking with Schweiz am Wochenende newspaper, Jordan reiterated that the franc remains “significantly overvalued” and pledged to maintain the central bank’s expansive monetary policy of negative interest rates and intervention threats.

Those currency interventions may already be taking place, according to BNP Paribas’s Steven Saywell, who says the franc is the best way to trade the French elections.

“We’re back to the scenario where the Swiss franc is the safe haven,” Saywell, global head of foreign-exchange strategy, told Bloomberg Television’s Francine Lacqua on Friday. “We’ve seen the Swiss franc appreciate. The Swiss National Bank’s had to intervene to prevent further appreciation.”

Still, the SNB is ready for future upsets, Jordan told the paper: “We still have enough leeway with our instruments to react to further shocks.

Hedging Outlook:

An option short in USDCHF also serves to hedge an interest rate shock to risk markets and the reflation trade. There’s a risk premium mismatch in EUR – plenty in options, none in the spot. This favors covered puts ahead of the French election but only in those pairs that are in a fundamental downtrend– we have this on in EURCHF and now sell a put on EURSEK against existing cash short.