Safe-have assets like the Swiss franc and the Japanese Yen are affected by the announcement from Pfizer about an effective vaccine to halt the virus.
The promise of a vaccine caused a decline in safe-haven currency like the Swiss franc. However, as the next Covid-19 infection resurfaced, the franc is expected to regain its strength.
The CHF is moving positively along with the prices of gold. The ECB is set for further expansion. With quantitative easing programs in December, the Eurozone is expected to get a boost in its economy. The CHF will get a positive impact once such measures are brought into the Eurozone, and news about the vaccine settles down.
With the US Dollar to extend weakness, the Fed may bring up further monetary easing to support the economy. The third wave in the US threatens progressive actions in the US.
USD/CHF Consolidates after Spike
The US Dollar Index fell 0.26% to 92.72. It saw a rise of 0.5% for the week. Wall Street moved higher on Friday after the Covid advisory team under President-elect Joe Biden ruled out a nationwide shutdown.
The Swiss franc moved to 0.9130 levels against the US Dollar. USD/CHF reversed from 0.9175 to close for the week at 0.9125 levels, as the dollar maintained its upward move.
The 50 DMA for the USD/CHF pair is supporting the currency pair at 0.9130. But if the US yields continue to drop further, the US dollar will move lower against other low yielding currencies like the Japanese Yen, the Euro, and the Swiss Franc. USD/CHF may move below the 50 DMA.
On the upside, the USD/CHF currency pair has resistance at 0.9190 and further at 0.9200 levels, which are the November highs.
Analysts expect the USD/CHF currency pair to move lower. The Swiss Franc will remain strengthened as central banks across the globe may maintain a loose monetary policy that will pull up the CHF value.
EUR/CHF Moves towards 2-Month Highs
The EUR/CHF currency pair saw a big leap on Monday after the Covid vaccine announcement. It bounced from 1.0677 to 1.0812. It went into consolidation mode later to close at 1.0798 for the weekend. The currency pair expects softer foreign policy reforms under President-elect Joe Biden.
European nations are facing a surge in coronavirus cases, which has triggered lockdowns and restrictions again in the Eurozone. Vaccine optimism, which drove the forex markets higher is now on the consolidation phase with a sideways move.
The French Prime Minister has announced that the lockdown would continue for at least two weeks to curb further infections. German ministers have not announced any definite period for the lockdown, saying it was “too early” to decide.
German Chancellor Angela Merle says, “We need to go through the tough winter months, which is going to be rough”. The month-long lockdown will end on December 2. With Covid-9 infections flattening on a 7-day moving average, local health authorities will determine if a further extension is required.
The ECB will continue to hold rates and look for other easing tools. Swiss rates remain unchanged at -0.75%. Negative interest rates have resulted in a decrease in interest margins, leading to a decline in profitability. The country which depends on its export industry is affected by the strong franc, which hurts the economy.
The EUR/CHF exchange pair will continue to remain within the 1.07 to 1.09 range for the year, say experts.
Brexit Talks Look Positive
The GBP/CHF currency pair, which slid below the 1.2000 levels in the first week of September, finally broke through its resistance last week. After hitting the 1.2200 marks, it closed for the week at 1.2034 levels on Friday, November 13.
The Pound Sterling to Swiss Franc saw a huge surge in the currency pair by more than 1% after the Covid-19 vaccine announcement by Pfizer.
Negotiations between the United Kingdom and the European Union are expected to result in an agreement soon. Though there are many issues, such as state aid and fisheries, an agreement will be a positive sign for both regions.
Once the vaccine comes into effect, it would be advantageous to the United Kingdom. It will put the Swiss franc into an unfavorable position. UK Unemployment rate has been on the rise in September, showing an increase in job losses. The furlough scheme is extended until March to support the second lockdown. It will further affect the GBP exchange rates negatively.
Pfizer Vaccine Announcement and Rising Covid Infections
Pfizer Inc’s announcement that its experimental vaccine is more than 90% effective in trial cases is positive news to investors. Global markets saw a surge last week with the vaccine’s effectiveness. However, with the infection spreading to major countries, a risk-averse situation keeps investors wary.
Further, the Federal Reserve head, Jerome Powell, claims that the economic outlook does not look very positive. US bonds dropped on Monday after the vaccine announcement. Currencies like the CHF, JPY, and EUR have benefitted from the sharp drop in the bonds.
ECB policymakers say that the new lockdown measures will affect the Eurozone, despite a vaccine relief seen.