UBS’s latest commentary on the currency pair sets expectations for near-term trading, with the analysis highlighting the contrasting monetary policies of the Swiss National Bank (SNB) and the Bank of England (BoE).
The bank noted that the SNB is nearing the end of its rate cutting cycle, while the BoE just started its easing cycle this month and is expected to continue cutting rates gradually until the end of 2025.
The SNB, which has started its rate cuts earlier than many of its peers, is expected to make one final cut in September before completing the easing cycle. In contrast, the BoE’s recent start of rate cuts is expected to be phased in gradually, with cuts occurring quarterly.
The different timelines of central banks’ actions are seen as a factor that will influence GBP/CHF rates, potentially narrowing the yield gap and providing some support to the Swiss franc against the British pound.
Despite the near completion of rate cuts by the SNB and continued cuts by the BoE, UBS suggests that strong services inflation in the UK and solid economic data from both the business and consumer sectors could mean that future rate cuts by the BoE will be moderate are.
UBS forecasts that GBP/CHF will continue to trade around recent levels in the coming quarters, with 1.11 being the midpoint of the expected range. The currency pair has breached major support levels during the latest sell-off and UBS advises investors to keep an eye on the support levels at 1.07 and 1.06, with resistance at 1.15 and the May highs at 1.1670.
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