The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate advanced by 2.9% as the European session progressed on Friday but went on to reverse gains as markets remained volatile after Thursday’s developments.
Pound Sterling to Swiss Franc (GBP/CHF) Exchange Rate Volatile after SNB Decision
The shock decision from the Swiss National Bank (SNB) to remove its 1.20 peg with the Euro and cut negative interest rates to -0.75% from -0.25% caused unprecedented market movement on Thursday.
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate plummeted by over 25% in the immediate aftermath of the decision as investors swarmed the Franc.
The Swiss currency also surged by around 38% against the Euro (CHF/EUR) to reach an all time high and advanced by 41% against the US Dollar (CHF/USD).
Since then both the Euro to Swiss Franc exchange rate and the US Dollar to Swiss Franc exchange rate have recovered over 4%.
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate achieved a high of 1.3383
While the SNB’s surprise move floored investors and saw many running to typically safe-haven assets like the US Dollar and gold, others chose to search out higher yielding avenues – so nations with stronger benchmark interest rates (like New Zealand and the UK) benefited from currency flows.
The decision was badly received in many quarters, particularly among investors who lost considerable amounts of money as a result of it. However, in the view of Marcel Michelson of Forbes; ‘It could have continued throwing money at buying up the Euro to hold on to a line in the sand of the foreign exchange seas, but the tide was rising and the line would disappear anyway. It could have pushed its short-term interest rates further into negative territory but that would have been a bit too unrealistic for the clear-headed bankers – interest rates ought to be positive because of a price for the time in the future.’
Some are taking the SNB’s 360 on the EUR/CHF cap to mean that the European Central Bank’s upcoming meeting will see them unveil a much larger-than-forecast quantitative easing scheme.
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate brushed a low of 1.2901
Consequently, the Euro has posted broad-based losses and the Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of an over 7-year high after briefly pushing beyond 1.31 yesterday.
According to industry expert Kathleen Brooks; ‘The SNB has close ties with the European Central Bank (ECB). This move could be a sign that the SNB thinks (or knows) that the ECB will embark on QE at next week’s meeting, and the size of its QE programme could be bigger than the market expects – perhaps 1 trillion Dollars, not the 500 billion Dollars that was ‘leaked’ last week.’
Switzerland’s retail sales report had comparatively little impact on the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate.
While retail sales in the nation were shown to have increased by 0.2% on the month in November, sales were down 1.2% on the year.
This followed the annual increase of 0.3% recorded in October.
Pound Sterling to Swiss Franc (GBP/CHF) Exchange Rate Forecast
With UK data lacking today, any further movement in the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate will be due to the continued fallout from yesterday’s unforeseen development.
Industry experts will also be taking an interest in the day’s big US news, the nation’s Consumer Price Index and University of Michigan confidence report.
Next week investors will be focusing on the UK’s employment figures and the publication of minutes from the Bank of England’s latest policy meeting.
Positive jobs data or hawkish minutes could bolster Sterling.
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate is currently trading in the region of 1.3161
The Euro to Swiss Franc (EUR/CHF) exchange rate is currently trading in the region of 1.0055
The US Dollar to Swiss Franc (USD/CHF) exchange rate is currently trading in the region of 0.8771
