Pound (GBP) Exchange Rate Firming Against US Dollar (USD) and Swiss Franc (CHF)
The Pound has been trading up against both the US Dollar (GBP/USD), and the Swiss Franc (GBP/CHF) on Wednesday, following an upbeat data day in the UK. The Pound is currently trading at 1.5259 against the ‘Swissie’, very near the session high of 1.5271. Meanwhile, Sterling has jumped over a cent versus the US Dollar, from the session low of 1.6247, to reach session highs of 1.6350.
If you're looking to make an international money transfer, we recommend TorFX.
The Pound has faced many pressures of late, with one of the most prominent issues being the Scottish referendum. Thursday will see Scottish citizens vote for independence away from the UK, which has seen mixed polls in the run-up to the referendum. However, despite an initial drop in the Pound, concerns over the outcome have eased allowing Sterling to gain from Bank of England (BoE) Meeting Minutes, and favourable domestic data.
The latest BoE minutes detailed that the Monetary Policy Committee (MPC) cast a split vote on the prospect of interest rate hikes in the UK, with two members voting in favour against the other seven. Moreover, this signals only the second split vote amongst board members since 2011.
The Pound has also enjoyed gains from the UK Unemployment Rate which fell from 6.4%, to 6.2%, the lowest level recorded in the last six years. Both of these factors enabled the Pound to jump a little higher amongst other major currencies.
The topic of interest rates, however, is also a strong factor affecting both the US Dollar and the Swiss Franc at present. Wednesday will also see the highly anticipated Federal Open Market Committee (FOMC) announce their decision on US interest rates. This event has caused a ripple effect in the market, shaking major currencies and creating much speculation around the US Dollar.
If the Federal Reserve indicates any change in language toward the topic of borrowing costs, the market may perceive it as a hawkish turn and the ‘Buck’ could rally. Forex expert Vassili Serebriakov stated: ‘The market was caught a little, but overall some long-Dollar squaring ahead of the Fed shouldn’t be surprising. Changing the language would be a strong signal, so they may prefer to wait until they are closer to actually raising rates.’
Meanwhile, the Swiss National Bank (SNB) is also discussing the hot topic of borrowing costs with the potential of dropping them into the negatives to relieve pressure on the Franc. SNB spokesman Walter Meier commented: ‘If needed, we would take extra measures, with a negative rate.’
This comment was further enhanced by Governing Board Member Thomas Moser stating that the SNB were ‘never shy’ about pushing interest rates into negative figures. The Swiss National Bank are likely to drop borrowing costs on Thursday, if the ‘Swissie’—which is tied to the Euro (EUR)—finds its minimum trading value under threat.
The Pound, US Dollar, and Swiss Franc, are all likely to face volatility in the remainder of the week as interest rates are such a prominent theme. Wednesday will prove most influential for the US Dollar exchange rate, whereas Thursday could see alterations to the Swiss Franc’s position against other majors. Moreover, the result of the Scottish referendum may cause the Pound to rally if the ‘No’ vote wins.