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Pound Swiss Franc (GBP/CHF) Exchange Rate Sinks as Hints of Global Negative Interest Rates Boost Safe-Haven CHF

October 20, 2020 - Written by John Cameron

GBP/CHF Exchange Rate Falls as Swiss Currency Benefits from Dampened Risk Sentiment


The Pound to Swiss Franc (GBP/CHF) exchange rate fell by -0.3% today, with the pairing currently fluctuating around 1.175fr.

The safe-haven Swiss Franc (CHF) has benefited from growing speculation that more global central banks – including the Reserve Bank of Australia (RBA) and Bank of England (BoE) – will take interest rates into negative territory.

As a result, demand for safe-haven assets like the Swiss Franc (CHF) has risen after several national banks have hinted at negative interest rates.

In Swiss economic data, today saw the release of September’s Trade Balance figure, which fell below forecasts from 3,543 million to 3,279 million.

Consequently, CHF investors are becoming more concerned for the Swiss economy as we enter the winter months.

Nevertheless, CHF traders are becoming concerned for Switzerland’s domestic economy following 8,737 new infections in Switzerland over the weekend.

Analysts at Reuters explain:

‘Switzerland announced tighter restrictions on Sunday to tackle the second wave of the coronavirus hitting the country, including a nation-wide obligation to wear masks and a ban on large scale public gatherings.’

Pound (GBP) Falls on Lack of Brexit Progress


The Pound (GBP) fell today following a lack of progress in UK-EU Brexit talks, with a Number 10 spokesman saying that the ‘situation remained as yesterday, and [the two sides] will remain in contact’.

Michael Gove, the most senior UK cabinet minister, said that talks with the EU had ‘effectively ended’.

As a result, Sterling traders are becoming more worried that Downing Street could be maintaining its hard stance, and could be pushing the UK towards an Australian-style Brexit.

However, a glimmer of hope appeared after Michel Barnier, the EU’s Chief Negotiator, said:

‘We should be making the most out of the little time left. Our door remains open.’

Meanwhile, the Bank of England (BoE) has made further hints of taking interest rates into negative territory.

BoE policymaker, Gertjan Vlieghe, commented today:

‘My own view is that the risk that negative rates end up being counterproductive to the aims of monetary policy is low. Since it has not been tried in the UK, there is uncertainty about this judgment, and the MPC is not at a point yet when it can reach a conclusion on this issue.
‘But given how low short-term and long-term interest rates already are, headroom for monetary policy is limited, and we must consider ways to extend that headroom.’

Consequently, this has sparked fears for the British economy, which looks increasingly set for a severe downturn in the winter months.

GBP/CHF Forecast: Could Talk of Negative Interest Rates Further Boost the Swiss Franc this Week?


Pound (GBP) traders will be looking ahead to tomorrow’s release of September’s UK Consumer Price Index figure.

Any improvement in the UK’s economic outlook would prove GBP-positive.

However, Brexit developments will continue to drive the GBP/CHF exchange rate. As a result, we would see Sterling suffer further if Downing Street maintains its hard stance on a post-Brexit trade deal.

Meanwhile, the Swiss Franc (CHF) will be driven by global risk sentiment.

The GBP/CHF exchange rate would continue to fall if global banks continue to drop hints of taking interest rates into negative territory.

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