UBS Analysis: GBP/CHF Expected to Range Trade Amid Differing Central Bank Policies
UBS' latest commentary on the GBP/CHF currency pair suggests that range trading is likely in the near term due to the contrasting monetary policies of the Swiss National Bank (SNB) and the Bank of England (BoE).
The SNB is nearing the end of its rate-cutting cycle, with one final cut expected in September, while the BoE has just begun its easing cycle and is projected to continue reducing rates gradually until 2025.
The differing timelines of these central bank actions are expected to narrow the yield difference between the two currencies, potentially providing support to the Swiss franc against the British pound. Despite this, UBS believes that strong services inflation in the UK and solid economic data could lead to moderate rate cuts by the BoE in the future.
UBS predicts that the GBP/CHF will trade around recent levels, with 1.11 as the midpoint of the expected range. Investors are advised to monitor support levels at 1.07 and 1.06, with resistance at 1.15 and the May highs at 1.1670.
In conclusion, understanding the central bank policies and economic data of different countries can help investors make informed decisions about their currency trades, potentially leading to profitable outcomes in the financial markets.