Long-term expectations for higher overnight lending rates in the U.K. paired with the rise in market sentiment led the British pound to advance against its major currency counterparts this week, and the GBP/CHF may continue to push higher over the near-term as the Bank of England takes unprecedented steps to stem the downside risks for growth and inflation.
[B]Currency Pair:[/B] GBP/CHF
[B]Chart:[/B] 60 Min Charts
[B]Short-Term Bias:[/B] Flat
[B][U]Analysis[/U][/B][B][U][/U][/B]
Long-term expectations for higher overnight lending rates in the U.K. paired with the rise in market sentiment led the British pound to advance against its major currency counterparts this week, and the GBP/CHF may continue to push higher over the near-term as the Bank of England takes unprecedented steps to stem the downside risks for growth and inflation. After reaching a high of 1.8976 in November, the pound-franc slipped to a low of 1.5124 in December due to a rise in risk aversion however, as Credit Sussie overnight index swaps show investors are raising bets for higher interest rates in the U.K. over the next 12 months, increased appetite for risk paired with prospects for a rate hike could lead the pair higher over the month. Over the next few hours of trading, we may see the GBP/CHF continue to advance to retrace the sell-off from December but nevertheless, as the RSI approach overbought territory, gains are likely to be capped and the pair may hold a tight rate ahead of the Bank of England rate decision at 11:00 GMT. Meanwhile, as the Swiss National Bank attempts to stem the appreciation in the low-yielding currency, expectations for an intervention could also provide a bullish bias for the pound-franc, and we may see the pair push above the April high of 1.7313 to work its way towards 1.7500-10 (61.8% Fib) over the following week. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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