swiss-franc-bank-notes - CHF

The British pound is lower against the Swiss franc on Monday after a number of European governments announced a lockdown with strict travel requirements to prevent the spread of the coronavirus, causing a flight to safety in markets.

GBP/CHF was down by 32 pips (-0.27%) to 1.1624 with a daily range of 1.1607 to 1.1779 of 9am GMT.

GBP/CHF is now down nearly 600 pips from its high on March 10, just 6 days ago. Last week the exchange rate tanked -4.66% in a huge drop by currency market standards.

Global central banks coordinated in a 1% cut to US interest rates

Global central banks including the Bank of England coordinated in a 1% cut to US interest rates and a series of other monetary stimulus measures on Sunday evening. The Federal Reserve has slashed US interest rates by 1% and started a $700 billion quantitative easing (QE) program. As a reminder QE is when central banks buy bonds to add new money that they have created into the financial system.

The shock decision, just three days before the US central bank was set to decide interest rates at its official meeting on March 18 was interpreted fearfully in markets. Demands for havens like the Swiss franc are rising and currencies from countries where there is room to further cut rates are falling.

The moves from central bankers were in response to a weekend full of announcements across Europe of extreme policies to restrict travel and try to prevent the spread of the COVID-19 coronavirus.

The Swiss franc

The difference between interest rates in Switzerland and other nations including the UK has narrowed in the last week. That is making the Swiss franc relatively more attractive from the standpoint of yield and less attractive to use in carry trades. The difference could easily narrow further if the Bank of England extends its stimulus, perhaps including the use of negative interest rates.

This week the Swiss National Bank will set interest rates but expectations are low that they can do anything to match the moves taken elsewhere because policy is already so accommodation.