The British pound has been grinding higher against the Swiss franc for some time now as we are trying to test the 1.06 level.
GBP/CHF
The British pound has been grinding higher against the Swiss franc for some time now as we are trying to test the 1.06 level. This is driven by a significantly hawkish shift in the Bank of England expectations relative to the Swiss National Bank.
Following the outbreak of the conflict in the Middle East at the end of February, the Bank of England pivoted from an expected rate cut cycle to a unanimous hold at the 3.75% level on March 19. Markets are now pricing in up to 3 interest rate hikes in 2026 to combat energy-led inflation, pushing the UK 10-year gilt yields to their highest level since 2008.
Verbal Intervention and Yield Differentials
Meanwhile, the Swiss National Bank has maintained its policy rate at 0% while the Swiss franc remains a primary safe-haven beneficiary of the Iranian conflict. The Swiss National Bank has explicitly increased its verbal intervention stating that a heightened willingness to intervene in the FX market to prevent excessive franc appreciation is forefront on their mind.
This has people running to the higher yielding British pound and quite frankly may continue to see them behave that way as the interest rates in England are likely to go higher, not lower, meaning that you get paid more over time for holding the British pound against the Swiss franc.
The 1.06 level is a major short-term barrier but if we can clear that level then it could very well put the 200-day EMA currently sitting at the 1.0696 level in the sights of bullish traders. I believe at this point in time it makes quite a bit of sense that we will probably see more of a buy on the dip attitude.