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Pound-Franc spot market rate: 1.1970Bank transfer rates (indicative guide): 1.1550-1.1630FX specialist rates (indicative guide): 1.1594-1.1880.Compare market-leading GBP/CHF rates here.Two major European investment banks are backing the British Pound to rally against the Swiss Franc in 2021, provided a free trade agreement is agreed between the EU and UK before the transition period finishes at year-end.

Analysts say the Swiss franc is overvalued and at risk of a decline in 2021 should the global economy stage a strong recovery and investors seek out assets that offer a greater return than offered by 'safe haven' Swiss assets.

"We retain the view that the CHF is in the slow process of changing a multi-year downtrend," says Manuel Oliveri, a strategist at Crédit Agricole.

The Swiss Franc shot higher in the first half of 2020, driven by strong demand for safe haven assets during the covid-inspired market meltdown.

It has since given up some of those gains, but modelling at the French investment bank suggests further gains must take place before it finds a fairer valuation.

"Improving global growth outlook coupled with reduced geopolitical tensions should lower safe haven buying interest in the currency. Less risk for another populist shift should prove an important factor too, especially when focusing on next year’s elections in Germany," says Oliveri.

Above: The Pound-to-Franc exchange rate in 2020

Crédit Agricole think that global healing as reflected in more stable global risk sentiment could also help making the CHF more attractive for funding once again, allowing investors to borrow in Francs and buy assets that offer higher returns elsewhere in the world.

"If so, there is also material scope for position squaring, especially when considering still sizeable structural long positioning in the currency," says Oliveri.

The Pound-to-Franc exchange rate is quoted at 1.1953 at the time of writing on December 09, with the pair having been in decline for most of what will prove to be a key month for the UK currency in light of an eminent conclusion to post-Brexit trade talks.

The base-case assumption held at UBS is that talks will end in a deal, which could allow for a protracted appreciation in the UK currency over coming months.

"The latest news flow points to an EU-UK free trade agreement being struck just in time for year-end ratification by the EU Parliament. Given markets – and hedge funds specifically – are under-positioned for such an outcome, we would expect a meaningful bounce for GBP on even a ‘skinny deal' outcome," says UBS in a year-ahead strategy note to clients.

The talks between the EU and UK are likely to go to 'the wire' with both sides looking resolute in an unwillingness to shift on their red lines concerning the issue of 'level playing field' provisions. The UK would like to be as free from EU regulation as possible, but the EU will want to keep the UK bound by their rules as far as is possible.

Foreign exchange analysts we follow are almost unanimous in the view that a deal would unlock further gains in Sterling.

"Even a partial Brexit deal could propel the GBP higher across the board and especially vs overvalued and low-yielding currencies like the CHF," says Oliveri.

UBS meanwhile say a bearish case for Swiss Franc depreciation continues to build.

"Reduced geopolitical uncertainties associated with the recent US election outcome are freeing the way for more intense focus on progress with COVID vaccines. Rising confidence in a cyclical upswing can be expected to weigh on the franc, especially at the point when lockdown concerns ease. Hurdles for further significant CHF appreciation have only grown," says UBS.

Strategists at the Swiss bank are targeting a rally in the Pound-Franc exchange rate to between 1.30 and 1.40 in 12 months' time. However, if the EU and UK were to fail in agreeing a free trade agreement, the pair would fail to find upside impetus.

Crédit Agricole are targeting a rally in the Pound-Franc exchange rate to 1.25.