Pound Sterling to Swiss Franc Exchange Rate (GBP/CHF) Climbs as BoE Interest Rate Anticipation Concludes

October 21, 2014 - Written by Tim Boyer

STORY LINK Pound Sterling to Swiss Franc Exchange Rate (GBP/CHF) Climbs as BoE Interest Rate Anticipation Concludes

The British Pound to Swiss Franc (GBP/CHF) exchange rate enjoyed gains on Tuesday as investors anticipated a divergence in votes amongst Bank of England (BoE) policymakers in Wednesday’s minutes.

However, the Swiss Trade Balance rose favourably in September from 2.45 billion from August’s 1.33 billion, allowing the Franc to gain against other majors.

Where does the CHF stand on today's forex markets?

The Pound to Swiss Franc exchange rate today is converting +0.41 per cent higher at 1.53006 GBP/CHF.
The Euro to Swiss Franc exchange rate converts +0.01 per cent higher at 1 EUR is 1.20696 CHF.
The US Dollar to Swiss Franc exchange rate is +0.64 pct higher with a conversion rate of 1 USD equals 0.94926 CHF.
The Canadian Dollar to Swiss Franc exchange rate today is converting +1.28 per cent higher at 0.84571 CAD/CHF.
The Australian Dollar to Swiss Franc exchange rate is +0.69 pct higher with a conversion rate of 1 AUD equals 0.83355 CHF.

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Swiss Franc Rate to Remain Tied to Euro

Not only did the Swiss Trade Balance extended its surplus in September, but exports also grew on the year.

Threats of the flailing Eurozone recovery affecting Switzerland’s economic growth have been a very real fear in the market. Inflation-adjusted figures saw September’s exports rise by 2.2% on the year.

The Swiss Franc is tied to the Euro (EUR) with the minimum exchange rate of 1.20 Francs per Euro.

However, despite speculation, the Swiss National Bank (SNB) is expected to keep the cap on the Swiss currency in place until at least 2016 in response to looser European Central Bank (ECB) policies.

The cap is currently enforced as an attempt to ward off deflation.

Moody’s Analytics credit ratings agency commented: ‘With the ECB cutting interest rates and honing in on quantitative easing, the SNB will have no choice but to extend the timeframe of its currency cap against the Euro. The SNB will enforce this policy by either moving into negative rate territory themselves, aggressively stepping up currency interventions, or both.’

The Swiss National Bank Governor Zurbuegg is scheduled to hold a speech at the ICMB in Geneve later on Wednesday which could enable CHF movement.

Wednesday could see significant GBP to CHF movement, with any further changes in BoE policymaker’s views primed to impact Sterling.

Despite the last two Monetary Policy Committee (MPC) meetings experiencing a divergence in votes (2:7), any further support for the prospect of immediate interest rate increases will encourage the Pound to rally.

UK inflation fell surprisingly last week, lending more support to the Bank of England doves in the next MPC meeting.

Economist Howard Archer commented: ‘We have long been expecting the Bank of England to first raise interest rates from 0.5% to 0.75% in February – but it’s looking ever more likely that the Bank will delay acting until nearer mid-year. Much will clearly depend on just how well UK growth holds up over the coming weeks and months, as well as how much wages move up in the 2015 pay settlements.’

Pound to Swiss Franc Forecast

Over the rest of Tuesday, the GBP to CHF currency pair is likely to remain in a similar state, with the Pound advancing against the Franc.

However, Governor Zurbuegg’s speech could see some movement in the Swiss Franc and the currency may regain some ground against Sterling.

Wednesday’s BoE meeting minutes will be highly influential for the GBP which could be encouraged higher if any other policymakers voted for rate hikes.

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