The British pound is higher against the Swiss franc on Wednesday.
The gains in Sterling belie the broader risk off move in markets that saw stocks lower by around 3% and bond yields turning lower, and environment that would typically benefit the franc as a haven.
The pound seems to be a big beneficiary of the cumulative actions from the Federal Reserve which are providing dollar liquidity to foreign central banks via alternate routes to direct foreign currency and security sales.
Pound versus CHF was up by 56 pips (+0.43%) to 1.1989 with a daily range of 1.1874 to 1.2038 of 4pm GMT.
The GBP/CHF found daily support above 1.19 before again rallying back though the big 1.20 level before turning lower.
Pound keeps moving higher despite jump in virus cases
The concerning jump in the death rate from the coronavirus so far is not a big factor in the movement of the pound.
UK March final manufacturing PMI came in at 47.8, a little under the preliminary estimate of 48. The numbers in no way reflect what is happening out there in the manufacturing industry.
One big example is the talk of giving state aid to Richard Branson’s Virgin Atlantic, which appears to be on the brink. The collapse of an airline the size of Virgin would affect vast swathes of British manufacturing suppliers.
Swiss franc losing battle of the havens to the dollar and yen
While other currencies have risen against the dollar too, London’s role as a financial hub, which still sees the largest volume of spot FX trades than any other financial centre, means the pound has benefitted more than the Swissie from the Fed’s actions.
As a reminder, the Fed setup a new facility yesterday to allow foreign central banks to swap Treasuries for dollars. This was in addition to swap facilities that allowed central banks to ‘swap’ other currencies for dollars. All this combined means if big institutions need dollars, they can go to central banks and get them instead of selling other currencies in the ‘open market’.
