The GBPCHF pair bounced from recent lows near 1.1300 recently but the move may be running out of steam and the pound is facing many risks in the weeks ahead. In a few weeks time the U.K. and the EU need to have an agreement on Brexit or it will be No-Deal. The U.K. is also going into a lockdown-lite mode with Boris Johnson talking about a 14-day full lockdown around the time of the agreement. In the last week we also saw the Bank of England (BoE) minutes signal that negative rates could be coming to the U.K. All of these risks are drivers for Swiss Franc strength.
This week saw the Swiss National Bank (SNB) hold its key interest rate steady at -0.75% which is lower than the 0.1% that is currently in use by the BoE. The SNB also kept their monetary policy unchanged as all central banks did in recent meetings. The key event for the pair was the announcement that negative rates had been discussed by the BoE’s Monetary Policy Committee and markets will expect them to move slowly into negative territory, but this is because they assume a Brexit deal.
The Swiss Franc could also see FX flows if Britain’s virus cases worsen. The Prime Minister has warned of a two-week lockdown, but the population was told that in March before a three month lockdown occurred. There are also further cases breaking out in the large European economies such as France and Spain, which could also lend weight to CHF strength.
Lastly, we also have overall market risk with U.S. stocks selling off due to the rise in virus cases and a lack of new stimulus announced. If this selling worsens ahead of the U.S. election then the Franc would offer its usual safe haven status.
GBPCHF bounced well from the support at 1.16300 but the move looks to be running out of steam on the daily. If price is capped here then selling will take the pair back to test the lows at 1.1300 with a chance to break and test the March lows if Brexit or virus causes shocks. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.
