FXStreet notes that the Swiss franc strengthened modestly in October from 1.0770 to 1.0674 as global uncertainties limited appetite for risk, benefitting risk haven currencies like the franc. SNB intervention eased recently signalling less upward pressure on the CHF but the franc is set to sustain strength into next year, per MUFG Bank.
“On a year-to-date basis CHF is the second best performing currency in the G10 space. This is despite substantial intervention to limit currency appreciation."
“There are certain near-term events that could increase CHF volatility. The US semiannual currency report has been delayed but is likely to be released before the end of the year and Switzerland could well be cited as a ‘currency manipulator’. This could fuel speculation of Switzerland pulling back from intervention that may help strengthen the franc. However, we doubt the SNB will alter its stance.”
“A Biden victory could see expectations of global trade tensions ease, which would help weaken CHF while progress on a COVID-19 vaccine and the EU Recovery Fund set to be approved and become active in 2021 should also help limit CHF buying. Finally, avoiding a no-deal outcome in UK-EU trade talks is likely also to help limit CHF strength. However, we doubt these factors will be enough to keep CHF on a weakening trend.”
“Aggressive Fed easing and more easing by many other G10 central banks will reinforce focus on currency debasement fears next year. The Gold/CHF correlation underlines this as a driver and we see higher gold prices and CHF strength unfolding in 2021.”
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