Pound to Swiss Franc (GBP/CHF) Trading Higher As Scottish Referendum Ends
The Pound to Swiss Franc (GBP/CHF) exchange rate has seen gains on Friday after Scottish citizens voted to keep Scotland as part of the UK. The Pound is presently trading at 1.5411 versus the ‘Swissie’, reaching session highs of 1.5454 and lows of 1.5299. Downward pressure has affected Sterling’s value against other majors in recent weeks amid heated political debate over the outcome of the vote.
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The UK published some positive data this week along with meeting minutes detailing another split vote from the Monetary Policy Committee (MPC). The Bank of England (BoE) board members were divided on the issue of interest rates, with two policy makers wishing for an immediate rise in borrowing costs.
However, the referendum placed pressure on the Bank of England, not only to make contingency plans in the event of a break, but also to time interest rates accordingly. Santander economist Stuart Green commented: ‘A “Yes” vote would have created significant risk of dislocation in financial markets, and you wouldn’t want to choose the meeting two weeks before the referendum to make the first rate increase in seven years. From now on, the biggest drivers for debate at the BoE will be wages and the path of inflation.’
UK wage growth data showed only a modest advance this week, with average earnings rising by only 0.6 in the three months through to July year-on-year. However, UK unemployment surprisingly dropped to its lowest level since 2008 at 6.2%.
Conversely, the Swiss National Bank (SNB) is presently debating lowering interest rates into the negatives in an attempt to keep the ‘Swissie’ stable against the Euro (EUR), which it’s tied to. The latest European Central Bank (ECB) monetary policy measures have placed stress on the SNB to control the Franc’s strength.
The ECB recently announced its plan to cut the interest rate down to 0.05%, a historic low for the Eurozone. Moreover, the ECB also stated that it would begin pumping money into the 18-nation economy in an attempt to encourage banks to lend more to small businesses and improve economic growth.
The SNB’s Thursday announcement suggested that it was willing to intervene if necessary to ensure its cap on the currency (introduced to enable better trading and inflationary levels) remained intact. The SNB commented that it was prepared to ‘take further measures immediately’ if required.
SNB Chairman Thomas Jordan stated clearly on Thursday that the central bank hasn’t yet intervened in foreign exchange markets, stating: ‘No, we haven’t had to enforce it. But we did say quite clearly that we are prepared to enforce the cap and if necessary, we will take further measures to do so.’
With no more domestic data publications expected for either the UK or Switzerland this week, the Pound to Swiss Franc exchange rate will feel the impact of Eurozone developments and the after-effect of the Scottish referendum.