The British pound is higher against the Swiss franc on Wednesday morning.
Strong market sentiment continued into Asian stock markets early Wednesday, keeping up demand for perceived riskier currencies like the pound and reducing demand for havens like the franc.
The Dow Jones Industrial Average, a benchmark for the 30 biggest companies in America jumped over 11% on Tuesday for its biggest daily gain since 1933. European markets saw their biggest daily moves since the 2008 financial crisis.
GBP/CHF was up by 74 pips (+0.64%) to 1.1608 with a daily range of 1.1530 to 1.1628 of 8am GMT.
The currency pair has been making steady gains since touching a record, now reaching above 1.16 and making new highs for the week. Weekly gains stand at +1.07%.
Pound continues move higher as US agrees stimulus bill
The British pound was benefitting from the improved mood across markets. Early Wednesday morning it was reported that after days of negotiations the United States Congress had agreed a massive new spending plan, expected to be in the region of $2 trillion.
The old saying goes that “When the US sneezes; the rest of the world catches a cold”. The coronavirus is expected to be a big problem for the United States but the extra government spending will hopefully avoid a deep and long recession. That’s good news for other parts of the world including the United Kingdom, which faces the very real prospect of no new trade deals after Brexit as countries focus efforts on containing the coronavirus.
Swiss franc drops after biggest jump in stock markets for a decade
During a market panic, cash is king and the Swiss franc had been one of the preferred currencies to keep that cash over the past month. If stock markets are in the midst of making a bottom, that means less demand for cash and quite likely less demand for Swiss francs.
Some caution is warranted though. An 11% daily jump in US stock markets is not something that happens in bull markets, it is more characteristic of the kind of emotional trading seen in a bear market, meaning lower stock prices could still be on the way.
