USD/CHF: Not yet the time for a sustained reversal of Swiss franc strength – MUFG

Analysts at MUFG Bank, continue to see potential in the idea of shorting the USD/CHF pair despite the fact that the recent news regarding the COVID-19 vaccine represents a challenge for the Swiss franc strength. They point out major central banks will likely keep a loose monetary policy that favors CHF over USD. 

Key Quotes:

“We continue believe that the election victory for Joe Biden supports our outlook for further USD weakness. We still expect the Fed to step up monetary easing to support the economic recovery especially now that Congress is likely to remain divided. It limits the room for fiscal policy to support growth and the third wave of COVID in the US threatens to be more disruptive.”

“The CHF has been one of the main beneficiaries of the currency debasement trade alongside the price of gold. Similarly, the ECB are set to announce a further significant expansion (EUR500bn plus) of their own QE programme in December which boosts the relative appeal of the CHF against the EUR as well.”

“We are not convinced yet that the global growth outlook has improved sufficiently to warrant a tightening of monetary policy given the unprecedented shock from COVID-19. We are therefore sceptical that the time has arrived for a sustained reversal of CHF strength.”