The firm says that a combination of a Brexit deal and improving risk sentiment would easily help the pair jump higher
UBS strategists are arguing that hedge funds are relatively under-positioning for a Brexit deal and that the pound can get a meaningful bounce even on a "skinny deal" outcome, while rising confidence in a cyclical upswing should weigh on the franc.
"From a spot handle of 1.20, we could easily envisage a rally to between 1.30 and 1.40 in 12 months' time."
It is easy to put two and two together, since their view requires the backing of some form of Brexit compromise and easing of lockdown measures as the virus situation abates.
I reckon the latter may have a more meaningful impact as it ties more to the reflation trade, but the first stumbling block ahead of the year-end will be Brexit.
We'll see if negotiators will come up with something, otherwise this view on GBP/CHF may very well be short-lived if we're headed for a no-deal outcome - as unlikely as it is.
