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Pound Swiss Franc (GBP/CHF) Exchange Rate Sinks as Risk-Off Market Mood Drive Demand for Safe-Haven Currencies

March 25, 2021 - Written by John Cameron

GBP/CHF Exchange Rate Falls as Souring Risk Sentiment Boost Safe-Haven Swiss Franc

The Pound Swiss Franc (GBP/CHF) exchange rate fell today as risk-off market mood has driven demand for the safe-haven Swiss currency. The pairing is currently trading around 1.29fr.

Today also saw the Swiss National Bank hold interest rates at -0.75%, retaining its expansionary monetary policy.

The SNB said in its press release:

‘The SNB’s expansionary monetary policy provides favourable financing conditions, counters upward pressure on the Swiss franc, and contributes to an appropriate supply of credit and liquidity to the economy.

‘Coronavirus and the measures implemented to contain it are continuing to shape the global economy more than a year after the outbreak of the pandemic. Following the strong recovery in the third quarter of 2020, economic growth worldwide was curbed by a renewed wave of infection. At the end of the year, GDP and employment were still significantly below pre-crisis levels in most countries.’

Switzerland’s economy has remained relatively robust throughout the Covid-19 pandemic, however, and this has driven up demand for the safe-haven CHF.

As a result, the Swiss Franc Pound (CHF/GBP) exchange rate has performed well this week, with souring risk sentiment driving demand for safe-haven currencies.

Pound (GBP) Exchange Rate Sinks Despite Boris Johnson’s Commitment to a ‘Cautious and Irreversible’ Lockdown Easing Plan

The Pound (GBP) stabilised against many of its peers today after Prime Minister Boris Johnson reiterated his plans for a ‘cautious and irreversible’ easing of lockdown measures in the next few months.

Health Secretary Matt Hancock, however, rejected claims that the latest modeling justifies an easing of the national lockdown.

In positive news, the NHS has cut its Covid-19 alert level from 4 to 3.

Sir Simon Stevens, the Chief Executive of NHS England, commented:

‘[This is] a consequence of both declining infection rates across the community and the impact that’s now being felt from the vaccination programme.’

However, Pound (GBP) investors are remaining largely cautious as the EU Vaccine Summit decides on whether to ban crucial exports of the AstraZeneca vaccine to the UK.

Any signs that the EU could restrict exports to the UK would throw the UK into a crisis as this would severely limit the number of vaccines at the disposal of the Government’s rollout plan.

As a result, we could see the GBP/CHF exchange rate slip lower today.

GBP/CHF Exchange Rate Outlook: Could Rising UK Retail Sales Boost Sterling?

Pound (GBP) traders will be awaiting tomorrow’s release of the latest UK Retail Sales figure for February.

Any improvement in the outlook for the UK economy would bolster the GBP/CHF exchange rate.

However, Pound (GBP) investors will be monitoring the UK-EU situation, with any signs of a limit on vaccines being GBP-negative.

The Swiss Franc (CHF) will remain sensitive to global risk sentiment, with any signs of rising Covid-19 cases in Europe likely driving-up demand for the Swiss currency.

The GBP/CHF exchange rate could head higher this week, however, if the outlook for the UK economy improves or the EU holds back on banning vaccine exports to Britain.

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