March 20, 2020 - Written by John Cameron
STORY LINK Pound Swiss Franc (GBP/CHF) Exchange Rate Rises as Safe-Haven Demand Slips
GBP/CHF Exchange Rate Edges Higher as SNB Holds Interest Rates
The Pound Swiss Franc (GBP/CHF) exchange rate rose by 1.7% today as risk sentiment begins to make a recovery, pushing down the appeal of safe-havens like the Swiss Franc and the US Dollar. The pairing is currently trading around 1.1565Fr.
Yesterday saw the Swiss National Bank (SNB) hold its interest rates at -0.75%. The SNB stressed that monetary policy alone could not fight the economic downturn presented by the coronavirus pandemic.
The SNB said in its statement:
‘Coronavirus is posing exceptionally large challenges for Switzerland, both socially and economically. Uncertainty has risen considerably worldwide, and the outlook both for the global economy and for Switzerland has worsened markedly.’
SNB Chairman Thomas Jordan also said that Switzerland’s economy was largely ‘not active’. Switzerland is now under lock-down to help prevent the spread of the coronavirus. This has left many investors concerned for the Swiss economy going forward.
Also, due to the Swiss Franc’s recent surge on safe-haven demand, damage was felt across Switzerland’s export-oriented economy.
Pound (GBP) Improves, UK Hopes to Defeat Coronavirus in 12-Weeks
The Pound (GBP) has made some recovery from this week’s plummet, in which we saw Sterling fall to 35-year lows against the US Dollar and 11-year lows against the Euro.
Sterling benefited from the Bank of England’s (BoE) drastic act of slashing its interest rates to an all-time low of 0.1%. The BoE also injected £200bn more stimulus into the economy to aid businesses and the Government recover amid the coronavirus pandemic.
Kenneth Broux, a currency strategist at Societe Generale, was upbeat in his analysis:
‘The Bank of England’s action was very timely. It’s not about the rate cut, more about restarting quantitative easing.’
Prime Minister Boris Johnson was also notably upbeat yesterday, saying that he hopes to see the UK recover from the coronavirus outbreak in as little as 12-weeks. This has left Sterling traders more chipper on the growing prospect of a light at the end of the tunnel for the British economy.
UK markets are also bracing for Chancellor Rishi Sunak’s announcement of a wage package rescue plan. This would bolster the chances of businesses and individuals recovering from the coronavirus fallout.
Dame Carolyn Fairbairn, the Director General of the Confederation of British Industry, commented on the measure:
‘Many other countries have now done this – France, Germany, Spain, Italy have put employee wage support in place and if that comes through quickly I believe there are businesses who will take a different decision because they want to keep their people and they want their businesses to be viable for when we recover.’
GBP/CHF Outlook: Gloom Swiss Business Expectations to Weigh on Swiss Franc
Swiss Franc (CHF) investors will be looking ahead to Monday’s release of the Swiss ZEW Survey of business expectations for March. With this likely to fall due to the Covid-19 crisis, we could see the CHF continue to dip.
The Swiss Franc will also remain sensitive to market demand for safe-haven currencies.
Any signs of a stabilising global economy would boost risk sentiment and weigh on safe-havens like CHF and the US Dollar.
The GBP/CHF exchange rate will continue to be driven by Downing Street’s efforts to curtail the economic impact of the coronavirus on the British economy.
If we see the Government ramp-up its stimulus efforts, we could see the Pound rise further against the Swiss Franc.
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