Pound Swiss Franc (GBP/CHF) Exchange Rate Slides as BoE May Need to Slash Interest Rates to Zero
The Pound Sterling Swiss Franc (GBP/CHF) exchange rate fell 0.3% on Friday, taking the pairing to an inter-bank rate of 1.2362Fr.
On Friday, Sterling remained under pressure as it was revealed the Bank of England (BoE) may need to slash interest rates all the way to zero in the case of a no-deal Brexit.
Senior BoE official, Gertjan Vlieghe stated:
‘On balance I think it is more likely that I would move to cut Bank Rate towards the effective lower bound of close to 0% in the event of a no-deal scenario.
‘It is highly uncertain when I would want to reverse these interest rate cuts.’
He also added that if Britain were to leave the European Union with a deal the BoE could raise interest rates.
In a year rates could rise to 1%, in two years to 1.25% and in three years’ time rates could rise to 1.75%.
However, this would also likely depend on the global economy recovering from the recent slowdown.
Swiss Franc (CHF) Rises as SGBP Labour Head Suggests More Cash for EU
Meanwhile, the head of Switzerland’s SGB labour union federation suggested the country could increase its financial contribution to poorer EU members.
This comes after glacial progress on a partnership treaty that Brussels has demanded for a decade.
This was triggered by a row over stock exchange access, as the EU allowed the equivalence which allowed Swiss equities to be traded within the bloc to expire at the end of June.
The Franc likely edged up against Sterling as this could potentially break the current political impasse over the stalled treaty with the EU.
In newspaper interviews, Pierre-Yves Maillard suggested Switzerland could increase its voluntary contribution to EU members to assure the current systems for Swiss pay protections and state aid remain in place.
Speaking to the Neue Zuercher Zeitung, he stated:
‘We could link the recognition of unilateral wage protection and the legitimate specialties of the public sector with better solidarity mechanisms.’
However, the European Commission has ruled out re-negotiations.
Pound Swiss Franc (GBP/CHF) Outlook: Will Lower than Forecast UK Unemployment Buoy GBP?
Looking ahead to next week, the Swiss Franc (CHF) could edge up against the Pound (GBP) following the release of the Swiss Producer and Import Prices.
If June’s prices rise higher than expected it could provide the Franc with an upswing of support.
Meanwhile, on Tuesday Sterling could rise following the release of the UK unemployment rate.
If the number of people in employment continues to rise to fresh record highs, it could cause the Pound Swiss Franc (GBP/CHF) exchange rate to rise.