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Pound-franc exchange rate's uptrend firmly entrenched.
The Swiss National Bank (SNB) signalled on Thursday it is comfortable with a weaker franc, which supports further gains in the pound-to-franc exchange rate.
The SNB held its policy rate at 0% and dropped its June reference to an "increased willingness" to intervene in the foreign exchange market.
That line was aimed at a franc that was too strong.
The franc has since fallen by around 3% on a trade-weighted basis, SNB Chairman Martin Schlegel told Thursday's news conference, a move he said was in line with widening interest rate differentials between Switzerland and the major currency areas.
Tolerance of a softer franc has been building at the SNB since March.
What the SNB Said
- The policy rate stays at 0%, and the SNB remains "willing to be active in the foreign exchange market as necessary".
- The conditional inflation forecast rises to 0.7% for 2026, 0.8% for 2027 and 0.8% for 2028, all assuming the policy rate stays at 0%.
- The weaker franc is named as one reason for the higher medium-term inflation forecast.
- The 2026 growth forecast is lifted to between 1.5% and 2%, with the franc's depreciation cited as a support.
Lloyds: CHF an Attractive Funding Choice
"The SNB move is the most interesting to our mind," says Nick Kennedy, FX Strategist at Lloyds Bank.
Kennedy notes the SNB raised its inflation profile but still saw CPI at the lower end of its 0% to 2% target throughout, and that was on the assumption of a policy rate held at zero.
Money markets price closer to three SNB rate hikes, an outcome Kennedy views as unlikely.
"The SNB's tone towards the CHF was more positive, noting recent weakness as helpful, while removing the line noting 'increased willingness to intervene' in the FX market," he adds.
"We think that it'll be quite content to see the currency continue to depreciate gradually," says Kennedy.
Daniella Arcadipane, Senior Currency Specialist at Indigo
Moving a life-changing sum abroad? You won’t be doing it alone.
One specialist explains every step in plain English and stays with it until the money lands. FCA authorised, FRN 594433.
Talk to a specialistA funding currency is one that investors borrow at a low interest rate to buy higher-yielding assets elsewhere, a practice that puts steady selling pressure on it.
"With yield differentials juicing that, the CHF as a funding choice looks increasingly appealing, particularly when framed against the old favourite, the yen," he adds.
The yen's funding appeal has faded as it gained ground this month.
GBP/CHF Uptrend Looks Entrenched
Sterling's yield premium over the franc makes the pound a natural home for franc-funded positions, and Bank of America said in July that pound-franc gains had further to run.
Price action has been bumpier: pound-to-franc fell from its mid-September peak as a broad sterling selloff took the pound to two-month lows against the euro and dollar this week.
The pair has recovered since the SNB decision and trades at 1.0967 on Friday.
Above: GBP/CHF at daily intervals with the 21-day (red) and 100-day (blue) moving averages.
Pound-franc has climbed from 1.03 in early March to a mid-September peak near 1.1060, building a series of higher lows along the way in an uptrend that looks comfortably entrenched.
Pullbacks are soft, the most recent one finding buyers at 1.09, a level that capped the pair in late July and has acted as a floor in September.
The 21-day moving average sits immediately overhead at 1.0979.
A close above it opens 1.10, with the September peak near 1.1060 the next resistance.
Below 1.09, support comes at the mid-August low near 1.0845 and then the 100-day moving average at 1.0806.
The 100-day average has risen steadily since June and the pair has held above it throughout, the clearest marker of the uptrend.
With the SNB content to see a gradual depreciation, 1.09 is the floor from which pound-franc can return towards 1.1060.
Daniella Arcadipane, Senior Currency Specialist at Indigo
Moving a life-changing sum abroad? You won’t be doing it alone.
One specialist explains every step in plain English and stays with it until the money lands. FCA authorised, FRN 594433.
Talk to a specialist
