Pound Swiss Franc (GBP/CHF) Exchange Rate Rangebound as BoE Hints at Negative Interest Rates

GBP/CHF Exchange Rate Steady as BoE Negative Interest Rates Fears Drag on Sterling

The Pound to Swiss Franc (GBP/CHF) exchange rate held steady this morning, with the pairing currently fluctuating around 1.185Fr.

Sterling held steady against the Swiss Franc today despite rising odds of negative interest rates from the Bank of England (BoE).

The BoE has asked banks today how ready they are for zero or negative interest rates, sparking concerns that they could be taking interest rates into negative territory in the near-term.

Sam Woods, the Bank of England’s Deputy Governor, said in a letter to banks:

‘As part of this work, we are requesting specific information about your firm’s current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration – and the steps that you would need to take to prepare for the implementation of these.’

Meanwhile, GBP investors are remaining cautious ahead of the British Government’s scientists updated on the Covid-19 infection rate later today.

Number 10 has warned that the UK has reached a ‘critical juncture’ on Covid-19, with Prime Minister Boris Johnson expected to reveal a three-tier alert system in today’s speech.

Consequently, GBP investors are becoming increasingly concerned that the UK’s economic outlook could grow darker throughout the autumn and winter months.

Swiss Franc (CHF) Steady as Swiss Covid-19 Case Rise Sparking off Concerns for Economy

The Swiss Franc (CHF) held steady today after Switzerland saw a record spike in coronavirus cases. The nation has seen nearly 1,500 new cases, taking total beyond 60,300, with 1,793 deaths as of Friday.

Analysts at Reuters commented:

‘The number of new coronavirus infections in Switzerland and Liechtenstein rose by 1,487 in a day, a record, data here from Switzerland’s public health agency showed on Friday.’

Meanwhile, there has been some positive news after the Swiss State Secretariat for Economic Affairs released its latest forecast. This shows that a Swiss 2020 economic slump is now ‘less serious than feared’.

The State Secretariat for Economic Affairs said in its latest report:

‘As time goes on, the Swiss economy should continue to recover at a moderate pace. The Expert Group is expecting GDP adjusted for sporting events for 2021 to grow by 3.8 % (June forecast: 4.9 %). Switzerland’s economic output would therefore return to its pre-crisis level only towards the end of 2021, assuming that no further widespread lockdown is imposed in Switzerland or in key trading partner countries.’

CHF traders will continue to monitor the global economic situation this week.

Any further signs of US political uncertainty or rising Covid-19 cases worldwide could boost safe-haven demand for the Swiss Franc.

GBP/CHF Outlook: Hard Brexit Fears Could Drag Down Sterling

Pound (GBP) traders will be eyeing tomorrow’s latest UK ILO Unemployment Rate report for August.

If Britain’s unemployment crisis appears worse-than-expected, then GBP would suffer.

Tomorrow will also see the publication of September’s UK Claimant Count Change.

If this data points to a bumpy road ahead for the UK economy, then the GBP/EUR exchange rate would fall.

Swiss Franc (CHF) investors will be paying close attention to global economic and Covid-19 developments. The safe-haven Swiss currency would benefit from worsening risk-sentiment.

The GBP/CHF exchange rate will also be driven by Brexit developments this week.

Sterling would suffer if UK-EU trade relations continue to sour, sparking off fears of a hard-Brexit as the year comes to a close.