The Pound (GBP) Swiss Franc (CHF) exchange rate is trending lower for he fifth straight session on Wednesday. A surprise 50 basis points interest rate cut from the Bank of England, in addition to continued flows into safe haven currencies is keeping pressure on the rate.
At 12:00 UTC, GBP/CHF is trading -0.4% lower at 1.2084. Investors will now look ahead to the UK Budget due to be unveiled shortly.
Pound Looks To Budget
Sterling dropped sharply at 07:00 UTC, as the BoE announced a surprise, emergency 0.5% cut to interest rates. This take the rate to 0.25%, from 0.75%, in a punchy move by the central bank in anticipation of a hard-economic hit from coronavirus in the coming weeks and months.
The timing of the move is important. The BoE made the announcement on the same day that the Government will unveil its spending plans in the 2020 Budget. The coordinated approach should bring more confidence to the market.
Attention in now shifting to the UK Budget due to be unveiled in Parliament shortly. The Budget had originally been expected to focus on Brexit. Now the focus is expected to be on navigating through the coronavirus hit to the economy. Pound investors will want to see plenty of support to small businesses, to help keep them afloat through a very hard, but temporary downturn.
Should the markets consider that the Chancellor Rishi Sunak is not spending sufficiently to prop up the economy in the face of the coronavirus hit, the pound could fall further.
Swiss Franc Lifts On Coronavirus Fears
Sentiment continues to be the principal driving force for the safe haven Swiss Franc. As fears escalate surrounding the coronavirus outbreak and its expected hit to the global economy, investors are seeking out perceived safe haven currencies such as the Swiss Franc and the Japanese Yen.
The number of coronavirus cases globally has hit 115,000 and the death toll has breached 4000. Whilst the spread of the virus in China appears to be slowing, it is picking up elsewhere across the globe. Italy is on lock down and the number of cases in US has increased to 1000.
The financial markets have picked up from Monday’s bloodbath, which saw stocks experience their worst one-day losses since the 2008; however, volatility is still high. Only a heavy-handed response from policymakers could stem the fear and even that is not certain as policy makers can’t stop the spread of the virus.
