Summary
- The British pound surged against the Franc on Monday, as the markets started to look for “risk on” assets.
British Pound vs Swiss Franc
The British pound rallied against the Swiss franc quite drastically during the trading session on Monday, as more of a risk-on sentiment in global markets has taken hold of the narrative landscape. Major equity indices such as the S&P 500, the NASDAQ, and even crypto have all been pushing higher on Monday. And this has shown itself in this pair because, quite frankly, this is a pair that's very sensitive to risk sentiment. From a policy divergent standpoint, the carry trade appeal is slowly returning.
The Bank of England remains relatively hawkish compared to the Swiss National Bank, as the BOE is currently holding its rates near 3.75%, and the Swiss National Bank is effectively at the zero bound, basically not offering anything to combat the Swiss franc strength. The yield differential will continue to favor the British pound overall.
Technical Levels and Central Bank Risk
And with that being the case, I think you have to look at this as a market that might be in the process of bottoming. The technical analysis shows a bit of a shift through most of the last couple of weeks after a persistent downtrend. I think the most obvious level is 1.0750. If we can break above there, then on a daily basis, I think you could see more money flowing into this market.
There is significant support down at the 1.0620 level, which has been held for a couple of weeks now, boding well for the idea of a turnaround. Ultimately, though, I think one of the big things that's out there hanging over the market is the fact that the Swiss National Bank has recently stated they are monitoring markets. In other words, they're willing to intervene if the Swiss franc gets too strong.