Pound Swiss Franc (GBP/CHF) Exchange Rate Tumbles after Surprise SNB Rate Hike

(Updated 16:30 16/06/22)

The Pound Swiss Franc (GBP/CHF) has traded within a narrow range over for the remainder of today. The exchange rate has remained close to the position it fell to this morning after the Swedish National Bank’s (SNB) s interest rate decision.

The currency pair managed to regain some ground after the Bank of England’s (BoE) decision to raise interest rates by 0.25% earlier today. Whilst the decision underwhelmed more hawkish investors, the BoE signaled that aggressive rate hikes in the future was still a possibility. This likely helped to bolster the Pound (GBP) and saw GBP/CHF climb higher.

At time of writing the GBP/CHF exchange rate is at around Fr1.1921, which is down around -1.5% from this morning’s opening figures.

Pound Swiss Franc (GBP/CHF) Exchange Rate Plummets ahead of BoE Interest Rate Decision

The Pound Swiss Franc (GBP/CHF) exchange rate is plummeting lower today after the Swiss National Bank’s (SNB) interest rate hike decision. The central bank shocked markets by announcing a surprise hike to -0.25%. The decision is seeing the exchange rate nosedive as a result. The currency pair may also be falling due to limited bets on the Pound (GBP) ahead of the Bank of England’s (BoE) interest rate decision. The BoE is widely expected to raise rates later today.

At time of writing the GBP/CHF exchange rate is at around Fr1.1896, which is down roughly 1.74% from this morning’s opening figures.

Swiss Franc (CHF) Soars as SNB Surprises Markets with Rate Hike

The Swiss Franc (CHF) is soaring against its rivals today after the Swiss National Bank’s surprise interest rate hike of 0.5%. The safe-haven ‘Swissie’ is also greatly benefitting from a risk-off market mood and is sapping demand for other safe currencies.

The SNB’s rate hike came as a great surprise to the markets. An interest rate hike was thought unlikely given the strength of the currency. Hawkish comments from the central bank regarding its forward outlook may also be propelling CHF to fresh highs today.

In a statement immediately after the announcement, the SNB said:

‘It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future to stabilize inflation in the range consistent with price stability over the medium term.’

The move came in the aftermath of Wednesday’s bumper 0.75% rate hike by the US Federal Reserve and pre-empts any action from the neighbouring European Central Bank (ECB).

Pound (GBP) Drops as Investors Remain Uncertain of BoE’s Rate Hike Plan

The Pound (GBP) is sliding lower ahead of the Bank of England’s interest rate decision. Investors remain unsure as to how drastically the central bank will hike rates, leading to uncertainty in Sterling. The currency may also be struggling amid fresh Brexit-related and UK political headwinds.

Sterling is edging lower today as economists remain unsure of the severity of the BoE’s interest rate decision. Some analysts are predicting that the central bank could enacts its first 0.5% hike since 1995.

Conall MacCoille, chief economist at wealth managers Davy, thinks there is strong evidence for a 0.5% hike:

‘CPI inflation at 9% and a tight labour market are creating a risk that employee price expectations could become entrenched. The MPC’s vote was split 6-3 in May, with the minority favouring a 50bps rise in interest rates’

Surging inflation in the UK has already seen the fastest fall to real wages in 20 years. Reports today have also indicated that food price inflation in the UK is likely to hit 15% by summer 2022.

GBP/CHF Exchange Rate Forecast: Will BoE Rate Hike Surprise to the Upside?

Looking ahead for the Pound, the BoE’s interest rate decision later today is sure to prompt movement in the currency. A 0.25% rate hike is likely to cause little movement given that the markets have largely priced in this approach. A surprise 0.5% hike could see Sterling leap in the short-term, however.

Investors will be particularly focused on any forward guidance from the BoE. Further poor forecasts for the UK economy could drag the Pound even lower.

For the Swiss Franc, further hawkish comments from policymakers could push the ‘Swissie’ even higher. A continuation of risk-off impulses within the market could also help to bolster CHF.

Gareth Monk

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