The British pound has been strong against the Swiss franc for a while now and is currently facing a barrier that could end up being important.
GBPCHF
The British pound has been positive against the Swiss franc again in what has been a fairly resilient relief rally over the last couple of weeks. We're rapidly approaching a make-or-break technical ceiling in the form of 1.05 and now I think we need to watch what happens next because this could be a bigger move waiting to happen.
The daily trend is bullish over the last couple of weeks as the market has seen consistent gains over the last week or so. The recent shock of the war in Iran initially caused a spike in safe haven demand for the Swiss franc, but it seems like the pound continues to show its surprising resilience. I do believe that we need to break above the 1.0536 level, which is a recent high from March 14, to really get things moving to the upside. I see support at 1.0455 underneath and then again at the 1.04 level.
A Bit of a Tightrope
The pound is walking a bit of a tightrope as fresh data released yesterday showed 0% growth for January, missing the 0.2% forecast. This has reignited the recession talk in the City of London.
The Bank of England meets this Thursday, but before the energy crisis, a rate cut was priced in with 90% certainty. Now, due to rising energy costs, that probability has plummeted down to 30%. The Bank of England is expected to hold rates at 3.75% to combat resurgent inflation.
This of course will continue to favor the upside as far as the interest rate differential is concerned. The pair is currently benefiting from a carry trade attitude. That being said, keep in mind that the Swiss franc is of course a safe haven currency and with oil prices hovering near $100 and the conflict in the Middle East seemingly only escalating, it could be thought of as a potential war hedge. There is serious intervention risk from the Swiss National Bank if the Swiss franc gets too strong, so I do think that even if we were to pull back, the downside is somewhat limited.