GBP Exchange Rates Plunge on BoE Stimulus Announcement
Updated 13:15 18/6/20: The Pound to Swiss Franc (GBP/CHF) exchange rate is currently down around 0.5% this afternoon in the wake of the Bank of England’s (BoE) latest rate decision.
As had been widely predicted the BoE opted to keep interest rates at a record low of 0.1% this month, whilst bolstering its quantitative easing programme by an additional £100bn in an effort to support the UK economy through its worst economic slump in centuries.
— Bank of England (@bankofengland) June 18, 2020
However, the BoE kept schtum in regards to negative interest rates, helping to cap Sterling’s losses this afternoon.
GBP/CHF Exchange Rate Steady Ahead of BoE
The Pound to Swiss Franc (GBP/CHF) exchange rate is mostly rangebound this morning as markets await the conclusion of the Bank of England’s (BoE) latest policy meeting later this afternoon.
At the time of writing the GBP/CHF exchange rate is trading at around CHF1.1884, virtually unchanged from this morning’s opening rate.
Pound (GBP) Flat as Investors Brace for BoE’s Stimulus Announcement
The Pound (GBP) is in a holding position against the Swiss Franc (GHF) and majority of its other peers this morning as investors await the BoE’s latest policy decision later this afternoon.
This week we have the June Monetary Policy Committee decision and minutes published at midday on Thursday. You’ll be able to access them here: https://t.co/y87v8RIjb3
— Bank of England Press Office (@BoE_PressOffice) June 15, 2020
The BoE is expected to leave interest rates at a record low of just 0.1%.
Instead the BoE is widely expected to announce an expansion to its quantitative easing programme this afternoon, with economists predicting the bank will top up its current £645bn stimulus scheme with an additional £100-150bn.
But the Pound’s response to the announcement may prove muted given the move has already been priced in by markets.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, comments:
‘Given the expectation of quantitative easing expansion is fully priced in, the BoE announcement per se may not move the market significantly.’
However, GBP investors will be on the lookout for any mention of adopting unconventional policy, amidst ongoing speculation that the BoE is exploring the possibility of negative interest rates.
‘With plummeting inflation, rising unemployment and lingering risks of a no-deal Brexit, the bank has room and solid reasons to move towards a more unorthodox policy.’
Swiss Franc (CHF) Muted as SNB Maintains Status Quo
At the same time, the Swiss Franc (CHF) is stuck in a narrow range this morning following the Swiss National Bank (SNB) own rate decision.
Unsurprisingly the SNB choose maintain its ultra-loose monetary policy with interest rates at an all-time low of –0.75%.
The SNB attributed its decision to need to tackle coronavirus uncertainties, while also expressing its desire to continue curbing the strength of the Swiss Franc by intervening in foreign currency markets as necessary.
The SNB’s latest policy statement read:
‘The coronavirus pandemic and the measures implemented to contain it have led to a severe downturn in economic activity and a decline in inflation both in Switzerland and abroad. The SNB’s expansionary monetary policy remains necessary to ensure appropriate monetary conditions in Switzerland.’
GBP/CHF Exchange Rate Forecast: Brexit Remains in Focus
Beyond today’s BoE rate decision, we are likely to see a returned focus on Brexit act as the main catalyst of movement in the Pound to Swiss Franc (GBP/CHF) exchange rate going forward.
Boris Johnson has made bold claims that with a ‘bit of oomph’ a Brexit trade deal could be finalised in July, but actual progress on a deal so far looks extremely limited.
This could limit any upside in Sterling as the risks of a no-deal Brexit appear to grow by the day.
Meanwhile, movement in the Swiss Franc is likely to continue to be dictated by market sentiment, with the safe-haven Franc expected to maintain a downward trajectory so long as investor optimism continues to improve.