Week Ahead: GBPCHF waits on central bank combo

• BoE & SNB rate decisions in focus

• Over past year SNB decision triggered moves of ↑ 0.85%

• Key level of interest - 1.1300

• Bloomberg FX model: 74% GBPCHF – (1.1179 – 1.1489)

The week ahead is stacked with central bank decisions, high-impact data releases, and speeches by numerous Fed officials:

Monday, 17th June

• CN50: PBoC MLF rate decision, retail sales, industrial production, unemployment
• JP225: Japan machinery orders
• US500: US Empire manufacturing

Tuesday, 18th June

• AU200: RBA rate decision
• GER40: Germany ZEW survey expectations
• USDInd: US retail sales, industrial production, Fed speeches

Wednesday, 19th June

• US Markets closed – Juneteenth holiday
• JP225: Japan trade, BoJ meeting minutes
• ZAR: South Africa CPI, retail sales
• UK100: UK May CPI

Thursday, 20th June   

• CN50: China loan prime rates
• EU50: Eurozone consumer confidence
• NZD: New Zealand GDP
• CHF: SNB rate decision
• GBP: BoE rate decision

Friday, 21st June

• JP225: Japan CPI
• CAD: Canada retail sales
• EU50: Eurozone S&P Global PMIs
• GER40: Germany PMIs
• UK100: Retail sales, S&P Global UK PMIs, Gfk consumer confidence
• US500: S&P Global US PMIs

Global markets could see heightened volatility due to the scheduled data releases and events.

But our focus lands on the GBPCHF thanks to a central bank combo featuring the Bank of England (BoE) and Swiss National Bank (SNB).

Looking briefly at the technicals, prices have slipped back within a weekly range with support at 1.1100 and resistance at 1.1500.

With all the above, here are 3 reasons why the GBPCHF could see big swings…

 

    1) SNB rate decision

After cutting interest rates by 25 basis points back in March, traders are pricing in a 73% probability of another 25-basis point cut next week.

Still, it is worth noting that GDP in Switzerland exceeded expectations and SNB President Jordan recently warned that a weaker franc could fuel inflation. These factors may influence what decision the SNB makes in June and beyond.

• The GBPCHF may rally if the SNB moves ahead with a rate cut.

• Should rates be left unchanged, this could send the GBPCHF lower.

Golden nugget: Over the past year, the SNB rate decision has only triggered upside moves on the GBPCHF with prices rising as much as 0.85% in a 6-hour window post-release.

 

    2) BoE rate decision

The Bank of England is expected to leave rates unchanged at 5.25% when it meets next week.

So, attention will be directed toward the policy statement and voting patterns of the monetary policy committee for clues on future moves. Although signs of cooling inflation support the argument for lower rates, the looming general election is a factor hard to ignore. Given the uncertainty, the BoE may wait until after the election on July 4 before deciding on future rates.

Traders are currently pricing in a 50% probability of a 25-basis point cut by August with this jumping to 85% by September.  

• The GBPCHF could push higher if the BoE signals that rates may remain higher for longer.

• Should the central bank signal that lower rates are around the corner, the GBPCHF could slip.

Note: One day before the BoE rate decision, the latest UK CPI report will be published. The annual inflation rate is forecast to cool to 2% while the core to 3.5% - a noticeable decline from the previous month. It will also be wise to monitor the retail sales, consumer confidence, and manufacturing data later in the week.

Golden nugget: Over the past year, the UK CPI has triggered upside moves on the GBPCHF of as much as 0.35% or declines of 0.5 % in a 6-hour window post-release.

 

    3) Technical forces

The GBPCHF is under pressure on the daily charts with prices approaching the 100-day SMA. However, the Relative Strength Index is heading towards 30 – signalling that prices may be nearing oversold conditions.

• A solid break below the 100-day SMA could open a path towards the 200-day SMA at 1.1160.

• Should 1.1300 prove to be reliable support, this could trigger an incline towards the 50-day SMA at 1.1500.

Bloomberg’s FX model points to a 74% chance that GBPCHF will trade within the 1.1179 – 1.1489 range over the next one-week period.

GBPCHF BoE SNB Rates