The firm says that investor demand for the franc is set to continue ahead of the recession cycle
In a note to its clients, UBS strategists said that the demand for the franc is set to increase as the country's economy will outperform others during the recession.
Adding that "Switzerland enters this recession with excellent credit quality, and its pandemic health situation is under control. Hence, its economy should do relatively well in comparison to other regions".
The firm favours a downside move in the euro and franc, arguing that the euro is likely to see further weakening and investors should hedge their exposure to the single currency.
They also point out that any economic impact from a further decline in the EUR/CHF exchange rate should be limited and only if it reaches the 1.03 level that the Swiss economy may face more serious consequences.
Well, I want to point out that the key thing to watch out for the franc in the coming months will be SNB intervention. They have already shown a strong appetite in recent weeks to limit the appreciation in the franc and that will continue for quite some time I reckon.
As such, don't expect any swift moves in favour of the swissie but there is likely to be gradual and limited moves - should the market outlook and risk mood keep more pessimistic.
