Choppy Day for GBP/CHF

Volatile Day for GBP/CHF with BoE and ECB Meetings

It’s been a fairly volatile day for the sterling/franc cross with key announcements from the European Central Bank and the Bank of England with sterling initially losing ground against both the franc and the single currency before heading back up towards the 1.44 mark.

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It was the first meeting of the Monetary Policy Committee since Mark Carney took over at the Bank of England on July 1st. As was widely expected, the Bank of England decided to keep interest rates at their record low of 0.5%, unchanged for over four years. It was also announced that they would not be adding to the £375 billion of quantitative easing already proposed. The decision not to embark on further Q.E. had been expected after a string of positive data suggested that the UK economy may finally be on the road to recovery. The better figures of late have reinforced hopes that growth in the second quarter of 2013 will be stronger than the first, when GDP increased by 0.3%.

“At its meeting today, the committee noted that the incoming data over the past couple of months had been broadly consistent with the central outlook for output growth and inflation contained in the May [inflation] report. The significant upward movement in market interest rates would, however, weigh on that outlook; in the committee’s view, the implied rise in the expected future path of Bank rate was not warranted by the recent developments in the domestic economy,” the MPC said.

Despite leaving interest rates and Q.E. unchanged, sterling lost a percent against the euro and the dollar in the half an hour following the announcement. It’s thought that sterling lost ground after the Bank of England confirmed that they would not be putting an end to monetary stimulus anytime soon, criticising the US’s decision to do so after causing turmoil in global markets.

Across the channel, Mario Draghi said the European Central Bank were taking unprecedented measures to re-assure markets that it had no plans to raise interest rates anytime soon. Considering the rising bond yields in Portugal, Draghi admitted the ECB had considered a rate cut, sending the single currency lower against sterling and the greenback.

“The governing council expects the key ECB rates to remain at present or lower levels for an extended period of time,” Draghi told a news conference.

The Franc tracked movements in the euro, first gaining against sterling and then losing ground as the euro weakened, ending the day in the 1.44’s. If you need to buy or sell Francs, the key is to catch the market as it spikes in your favour. Currency brokers can help with the timing of your purchase to ensure you’re making the most of your currency. Contact me today for a free, no obligation consultation by completing the contact form on the right.