The GBP/CHF price continued its downward momentum as investors digested the extremely hawkish interest rate decision by the Swiss National Bank (SNB). The GBP to CHF price crashed to a low of 1.1782, which was the lowest level since December 2020. It has fallen by almost 10% from its highest point last year.
Hawkish SNB and BOE
The GBP/CHF, USD/CHF, and EUR/CHF price retreated sharply after the surprise by the SNB. In its meeting last week, the bank decided to deliver its first rate hike in 15 years. And the rate hike was huge. Instead of raising interest rates by 0.25%, the bank decided to hike by a whopping 50 basis points.
In a statement on Wednesday, the bank’s governor said that the rate hike was necessary to fight the rising inflation. Recent data show that the soaring commodity prices have helped push Swiss inflation to the highest point in years. At the same time, he said that the bank will likely keep rising interest rates in the coming months. Trade the GBP/CHF using one of our recommended forex brokers.
Still, there are concerns about how high the SNB will push rates. An aggressive policy will likely strengthen the Swiss franc. Historically, the SNB prefers a weak franc because of the country’s reliance on exports.
The GBP/CHF price also dropped following the strong UK consumer and producer price index data. The numbers showed that the country’s inflation continued rising even after the hawkish statement by the Bank of England. The next key catalyst for the pound to franc price will be UK public spending data and the latest flash manufacturing and services PMI data.
The daily chart shows that the GBP to CHF pair has been in a strong bearish trend in the past few days. It managed to move below the key support at 1.2077, which was the lowest point in April this year. The pair also retreated below the first support of Woodies pivot point while the downward trend is being supported by the 25-day and 50-day moving averages.
Therefore, the pair will likely continue falling as bears target the second support at 1.1690. A move above the resistance at 1.186 will invalidate the bearish view.