The British pound is lower against the Swiss franc on Thursday morning with the pre-existing flight to safety getting exacerbated by disappointment in a speech from US President Trump that offered no clear signs of fiscal stimulus while banning all travel from Europe.
GBP/CHF was down by 46pips (-0.38%) to 1.1988 with a daily range of 1.1959 to 1.2061 of 5am GMT. The currency pair made a more decisive move below 1.20 on Thursday, unwinding all the previous days’ gains up to 1.215. The currency pair ended up down -0.79% yesterday, despite a big intraday leap, leaving weekly losses at -2.00%
British pound downside limited by stimulus
The British pound had initially fallen after the announcement of a surprise 50 basis point cut to interest rates on Thursday but quickly rebounded to turn higher on the day. The gains came as the UK budget announced a large £30 billion stimulus package to combat the economic damage from the coronavirus outbreak in conjunction with a much bigger longer term spending plan.
It will be the biggest increase in spending for 30 years, mostly funded by a large increase in borrowing. The lower interest rates will of course make the borrowing cheaper for the government to fund via the selling of gilts. The increased spending should boost the UK economy once the coronavirus outbreak ends but whether it will be a positive for the pound-Swiss exchange rate will depend on how the stimulus compares to any announcement made in Switzerland.
Swiss franc haven demand increases after Trump travel ban
Haven flows moderated slightly overnight following comments from the Governor of the Bank of Japan Kuroda. Kuroda said the Japanese central bank will aim to “stabilise the markets with asset purchases.” Still large opening losses are expected in UK, Swiss and other European stock markets on Thursday following the speech from US President Donald Trump.
Trump announced that all travel from Europe will be banned for 30 days, excluding the United Kingdom although the ban does not include trade, it only applies to people. The sudden announcement caused panic and confusion for travellers as well as investors, resulting in increased demand for the franc as safer place to put financial assets.
