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Analysts at MUFG Bank, expect the USD/CHF pair will break under the 0.9000 area. They explain COVID-19 vaccine news challenges the Swiss franc strength, but major central banks will continue to keep loose monetary policy in place well into the recovery supporting the appeal of CHF.

Key Quotes:

“USD/CHF recently tested and held key support at the 0.9000-level but we expect it to break going forward. 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 and the third COVID wave is intensifying in the US.”

“The latest FOMC minutes signalled that the Fed is likely to provide a stronger commitment to maintain QE purchases throughout next year even as the recovery strengthens. Similarly, the ECB are set to announce a further significant expansion of up to EUR500 billion of their own QE programme in December which boosts the relative appeal of the CHF against the EUR as well. As a result, we believe it is premature to see a sustainable reversal lower for currency debasement trades which could rebound next year if inflation picks up while loose monetary policy remains in place. The CHF has been one of the main beneficiaries of the currency debasement trade alongside the price of gold.”

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