USD/CHF languishes close to annual lows in the 0.8820s

• USD/CHF hit fresh annual lows during Wednesday’s Asia Pacific session under 0.8820 and has since remained pressured below 0.8850.
• The pair currently trades close to these lows, pressured by broad USD weakness.

USD/CHF slumped to fresh annual lows beneath 0.8820 during Wednesday’s Asia Pacific session. The pair saw a short-lived pullback up to the 0.8850 mark during the early European morning session but has since slid back towards lows and currently trades around 0.8830, down around 0.1% or 10 pips on the day.

What’s next for the Swissie in 2021?

CHF looks to close out the year with gains of nearly than 10% versus the US dollar, more than all other G10 currencies aside from SEK. The fact that the Swiss National Bank (SNB) was unable to substantially ease monetary policy conditions in 2021, unlike the likes of the Fed, the BoC, the RBA, the RBNZ, the BoE and the Norges bank certainly seems to have been one factor that helped – CHF saw is interest rate disadvantage compared to USD eviscerated as the Fed dropped rates to zero, which has actually pushed real US interest rates well below those in Switzerland.

No such erosion of the Swiss interest rate disadvantage is around the corner in 2021 (unless the Fed wants to take interest rates into negative territory, which seems highly unlikely at this point). Thus, while USD/CHF is expected to continue to depreciate in 2021 as a function of a weakening USD (driven by expectations for stronger global growth), it sems unlikely the Swissie will continue to outperform its more cyclical G10 peers such as AUD, NZD and CAD.

Indeed, this has actually already been the case over the course of Q4 2020, the quarter when risk assets were pumped and the dollar dumped amid a combination of vaccine optimism and Joe Biden’s US Presidential Election victory (which, combined, gave a significant boost to global growth expectations in 2021). CHF is up 4.3% on the quarter versus the US dollar, less than its more risk-sensitive peers CAD (4.4%), EUR (4.8%), GBP (5.3%), AUD (7.3%), NZD (8.9%), NOK (9.1%) and SEK (9.2%).

USD/CHF eyes steady 2021 grind towards post-peg pull lows

Having broken below key support around the 0.9200 level in 2020, USD/CHF eyes a steady grind back towards set in the aftermath of the SNB surprise pulling of the CHF peg in early 2015 that saw the cross slump as low as 0.8300. Before making it that low, the cross is going to need to break below 2014 low at the 87.00 handle.

USD/CHF weekly chart