The Swiss franc strengthened against the British pound this week following the drop in market sentiment, and we are likely to see the GBP/CHF fall lower over the remainder of the week as investors curb their appetite for high risk/reward investments however, the pair may continue to hold a tight range over the near-term as the Swiss National Bank pledges to stem the appreciation in the low-yielding currency.
Currency Pair: GBP/CHF
Chart: 60 Min Charts
Short-Term Bias: Flat
Analysis
The Swiss franc strengthened against the British pound this week following the drop in market sentiment, and we are likely to see the GBP/CHF fall lower over the remainder of the week as investors curb their appetite for high risk/reward investments however, the pair may continue to hold a tight range over the near-term as the Swiss National Bank pledges to stem the appreciation in the low-yielding currency. After reaching a high of 1.8976 in November, the pound-franc slipped to a low of 1.5124 in December due to a rise in risk aversion however, Credit Suisse overnight index swaps shows that investors expect higher interest rates in the U.K. over the next 12 months as the Bank of England puts a floor on the overnight lending rate, and long-term expectations for higher rates may continue to drive the pair higher over the following month. Moreover, as Switzerland faces its worst economic downturn in over a quarter century, mounting risks for deflation led the SNB to take extraordinary steps to shore up the economy, and as the central bank maintains a dovish tone, the Swiss franc may face increased selling pressures over the near-term as Governor Roth intervenes in the currency market. Nevertheless, as risk trends continue to drive price action in the foreign exchange market, the rise in risk aversion may continue to weigh on the exchange rate as the low-yielding currency continues to benefit from safe-haven flows, and we may see the pair continue to trade sideways as the market sentiment remains unsettled. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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