Pound Swiss Franc (GBP/CHF) Exchange Rate Rises as Investors Fret Over SNB Intervention

Swiss Franc (CHF) Retreats from Four-and-a-Half Year High

The Pound Sterling Swiss Franc (GBP/CHF) exchange rate edged higher, leaving the pairing trading at around 1.2695Fr.

Yesterday saw the Swiss Franc jump to a four-and-a-half-year high against the Euro as investors were concerned about the spread of coronavirus.

The safe-haven Franc benefitted, although slipped on Tuesday after markets worried about the spread in neighbouring Italy.

However, analysts have stated that the surge could lead to intervention from the Swiss National Bank.

While the SNB did not comment on this, earlier this month Chair Thomas Jordan stated that he thought the Covid-19 outbreak had sparked investor appetite for CHF.

Fears the spread will become a pandemic increased after reports of new cases in Italy, South Korea, and Iran. However, China relaxed restrictions as the rate of new infections eased.

Commenting on this, J.Safra Sarasin economist, Karsten Junius stated:

‘There is no doubt the Swiss Franc is coming under heavy pressure from investors in a risk-off environment due to the coronavirus, that’s why the currency has risen.

‘If the Franc continues to rise the SNB will come more significantly into the market. If the Franc breaks through to 1.05 something, that is the level I think it will defend.’

Sterling (GBP) Rises as Traders Find Stability

The Pound was able to make gains against the Swiss Franc as markets focused on the upcoming UK-EU trade negotiations.

Added to this, traders worrying about the spread of Covid-19 found stability, prompting investors to move away from the safe-haven US Dollar which had previously sent GBP lower.

Meanwhile, the European Union mandate aims to offer the UK no tariffs and no quotas in the future. This is in exchange for Britain to promise not to undercut European companies with lower environmental, labour, tax and state aid standards.

However, Britain has made it clear it does not want to make such a commitment and stressed its ‘primary objective in the negotiations is […] economic and political independence’.

With little UK data set to be released, traders will be focused on any developments ahead of next month’s negotiations.

According to RBC Capital Markets Global Head of FX Strategy Elsa Lignos, the media reports highlighting the differences between their negotiation mandates showed:

‘The two sides are far apart as a starting point and it remains to be seen how much progress they can make in the remaining nine months.’

Pound Swiss Franc Outlook: Swiss Economic Sentiment in Focus

Looking ahead, the Swiss Franc (CHF) could extend losses against the Pound (GBP) following the release of February’s Economic Sentiment Index.

If Swiss sentiment slumps further than expected, the Franc will slide.

Meanwhile, the upcoming trade negotiations between the UK and the European Union will remain the main driver for Sterling movement.

If tensions increase ahead of next month’s discussions, the Pound will remain under pressure and the Pound Swiss Franc (GBP/CHF) exchange rate will remain flat.

Millie Empson

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