Switzerland’s central bank cuts interest rates

Switzerland’s central bank cuts interest rates

For the first time since 1970, Switzerland’s central bank has introduced negative deposits of minus 0.25%. With the global economic outlook seeming bleak, the Russian financial crisis worsening and the Eurozone on the brink of introducing a full scale quantitative easing programme, investors have been turning to the franc for a safe return.

In anticipation of the imminent introduction of a QE programme by the ECB, the Swiss central bank have responded in a bid keep the key 1.20 peg on the euro. Whereas the ECB introduced these measures to encourage liquidity in the markets and encourage lending and revitalise the economy, SNB president Thomas Jorden told reporters that “the minimum exchange rate remains key to ensuring appropriate monetary conditions in Switzerland. The introduction of negative interest (sic) will support the enforcement of the minimum exchange rate.” These new rate will not take full effect until 22nd January, corresponding with the first policy decision of the ECB in 2015.

GBP/CHF exchange rate

The markets reacted accordingly to this decision, with the GBP/CHF cross moving in the pound’s favour and strengthening against the franc, beginning the day at 1.51 and gaining two cents to hit the mid 1.53s. Whereas against the euro the franc weakened to 1.2098, moving away from the 1.20 cap and against the dollar the franc fell to levels not seen since 2012, at 0.9848.

Once again, these volatile movements highlight the need to keep in touch with your account manager here at Foremost.

CHF Graph

 

At the Foremost Currency Group we help you monitor the markets, ensuring you time your currency purchase at the most opportune moment to achieve the best return. Open a free no obligation trading account today, or speak to one of our dedicated and knowledgeable account managers for more information on how the process works and to access to our bank-beating exchange rates.

Kingsley Walker

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