GBP/CHF to Rise as Safe-Haven Demand for Franc Wanes: UBS

UBS Projects Upward Trend for GBP/CHF

Financial services firm UBS forecasts a gradual appreciation of the British pound against the Swiss franc (GBP/CHF). The projection is based on an expected reversal of safe-haven flows into the franc and strong fundamental support for sterling, coupled with positive UK economic data.

Situational Overview

The Swiss franc recently benefited from increased demand as a safe-haven asset. However, UBS currency analysis suggests this trend will reverse in the coming months. Simultaneously, a previously priced-in budget-related risk premium has been eliminated from the British pound, providing additional stability and support for the currency.

Impact on the Currency Market

A critical factor driving the forecast is the significant yield differential, which currently exceeds 3.5% in favor of the pound. This advantage makes holding sterling more attractive for investors seeking returns compared to the lower-yielding Swiss franc. According to UBS, this fundamental aspect provides a strong basis for the expected appreciation in the GBP/CHF pair.

Summary Outlook

With safe-haven demand for the Swiss franc expected to diminish and a compelling yield advantage for the pound, UBS anticipates a steady upward trajectory for the GBP/CHF spot exchange rate. Traders will closely watch economic indicators from both nations to confirm this trend.

FAQ

Q: Why is the GBP/CHF exchange rate expected to rise?
A: UBS predicts a rise due to waning safe-haven demand for the Swiss franc, positive UK economic data, and a significant yield differential of over 3.5% favoring the British pound.

Q: What does the yield differential signify for investors?
A: The higher yield on the British pound makes it a more attractive currency for investors to hold for returns compared to the Swiss franc, which can drive capital flows into the pound and increase its value.

Source: Investing.com