Pound Swiss Franc Forecast: What Impact Will SNB Rate Decision Have on GBP/CHF Exchange Rate?

SNB Rate Decision Leaves GBP/CHF Exchange Rate Muted

The Pound to Swiss Franc (GBP/CHF) exchange rate is holding close to its opening levels this morning after the pairing’s early gains were erased following the Swiss National Bank’s (SNB) latest policy meeting.

At the time of writing GBP/CHF is mostly unchanged, with the Pound having relinquish all of its early gains.

Swiss Franc (CHF) Stable as SNB Keeps Monetary Policy Unchanged

The Swiss Franc (CHF) was able to reverse its early losses against the Pound this morning as investors reacted to the SNB’s latest rate decision.

Unsurprisingly Switzerland’s central bank voted to leave interest rates at a record low of -0.75% this month as policymakers continue to try and weaken the Swiss Franc.

The strength of the Franc remains a major headache for the SNB, as its status as a safe-haven currency sees investors continue to flock to it at times of uncertainty, hampering its attempts to lift inflation.

Given that market uncertainty is high due to Brexit and the possibility of a looming trade war this has seen CHF remain in constant demand for the past few years.

The SNB forecasts inflation will not reach the bank’s target rate of 2% until at least 2020, likely meaning that monetary policy is likely to remain accommodative for some time yet.

Pound (GBP) Dented by Brexit Scepticism

The Pound meanwhile appears to be inching lower this morning as increased concerns over Brexit weigh on market sentiment.

Fears have been raised over the UK’s ability to secure a meaningful transition deal with the EU.

This has included Brexit secretary, David Davis’s recent comments indicating that the Brexit transition period may be shorter than initially planned, with the EU seeking to impose a 2020 deadline on any agreement made.

This also comes amid speculation that the start of the second stage of Brexit negotiations may be delayed until June, leaving the UK government less than a year to secure a new trade agreement.

GBP/CHF Exchange Rate Forecast: BoE to Signal Rate Hike in May?

Looking ahead, with little economic data left for this week’s session, markets are likely to begin to turn their attention to the slew of UK data set to be released next week.

Chief among this will undoubtedly be what comes out of the Bank of England’s (BoE) latest policy meeting, with the GBP/CHF exchange rate likely to be driven higher should the bank hint at the possibility of an upcoming rate hike.

Most economists expect the BoE to target a May rate hike and the Pound is likely to soar if policymakers appear supportive of this.

Meanwhile the Swiss Franc may find some early gains next week should Switzerland’s latest trade balance show that the domestic surplus rose as expected in February.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail

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