The British pound is higher against the Swiss franc on Tuesday thanks to a rebound in global risk sentiment which is denting demand for the franc as a haven. The rebound follows a dark day on markets that oil prices fall by the most since the gulf war and global stock markets register the worst declines since the 2008 financial crisis.
GBP/CHF was up by 51pips (+0.41%) to 1.2199 with a daily range of 1.2121 to 1.2234 of 7am GMT.
Pound to Swiss frac rate recovered 1.22 after rebounding from a 6-month trough below 1.21. By the end of Monday, the exchange rate had fallen -just 0.08%.
Broader Market Sentiment Continues to Dominate the Moves in Forex Markets
On Tuesday, talk of stimulus in Asia and possible tax cuts in America is improving the mood, and seeing the pound gain back some lost ground to the franc.
The increasing bets of a Bank of England rate cut combined with recession fears are pushing investors into the relatively safety of government debt. UK gilt yields fell to record lows and the spread between UK and Swiss yields has been tightening, improving the attraction the franc. Switzerland has lower interest rates than the UK but a lower-yielding currency tends to gain in value when the difference narrows.
The Swiss franc
Governments in the UK, Switzerland and other European countries are starting to ratchet up their response to the COVID19 outbreak as the number of cases grows. It is hoped that other governments will not need to match measures taken in Italy, where a recession is now all but guaranteed. Prime Minister Giuseppe Conte has put the whole of Italy on lockdown, refusing entry to country and telling citizens only to travel for work or family emergencies. He described the measures as “I stay at home.”
Despite increasing rumblings of a big intervention from the Swiss National Bank and foreign reserves data showing some level of Swiss-franc selling is already taking place, the historic safety of Switzerland as a place to leave your money is fueling more demand for the franc.
