GBP-CHF Trading
00.00 | Instrument:GBP/CHF |
GBPCHF is the ticker symbol for the British pound to Swiss franc exchange rate. The pound sterling and the Swiss franc are considered major currencies, but the GBPCHF pair is regarded as a minor pair because it does not constitute the US dollar. Minor currency pairs typically feature lower liquidity and wider spreads than major currency pairs.
In the GBPCHF forex rate, GBP is the base currency, whereas CHF is the quote/counter currency. This means that at any given time, the price of GBPCHF represents the amount of Swiss franc it would take to exchange for one unit of the pound sterling (1 GBP CHF).
History of GBPCHF
The GBP to CHF pair combines two European currencies with rich histories. The pound sterling is the 4th most traded currency globally, and it traces its roots way back to 775AD. GBP, which is the official currency of the UK and its territories, is considered the oldest currency in the world that is still in circulation today. The first-ever pound coin appeared in 1489, whereas the first-ever pound note was printed in 1694 following the establishment of the Bank of England. In its early years, the pound’s value was referenced in Silver’s weight, but Gold soon became the standard for referencing and backing the currency. However, the global conquests of the British Empire continually demanded more resources, and the gold standard had to be abandoned to support the country’s efforts during World War I. Before the war, the UK was a major world power, and more than 60% of the global debt was held in pounds. The country lost this prestigious position to the US, and when World War II broke out, it strategically had to peg its currency to the US dollar. However, this peg ended in the 1970s, and the GBP now freely floats in the market. The GBP has, in recent years, seen its value significantly impacted by events such as the 2008 global financial crisis and UK’s exit from the European Union in 2016.
The Swiss franc has also come a long way, introduced in 1850 after the modern Switzerland state was formed just two years earlier. The CHF replaced multiple coins minted differently by the 13 confederates at the time. In 1865, Switzerland joined France, Italy, and Belgium to establish the Latin Monetary Union. The four countries all pegged their currencies to Silver. The union officially ended in 1927, but Switzerland continued to link the CHF to Silver until 1936. In 1945, Switzerland joined the Bretton Woods System, and the CHF became pegged to the US dollar. The system was collapsed in the 1970s, and Switzerland opted to peg its currency to Gold. This is one reason why the Swiss franc attained the prestigious title of a ‘safe haven’ currency. The country’s central bank pursued a zero-inflation policy, and politically, Switzerland has maintained neutrality and has notably never engaged in any armed conflict since 1815. However, the Gold peg was removed through a referendum in 2000. In 2011, Switzerland pegged its currency to the euro but also opted out in 2015 following plans by the European Central Bank to roll out a quantitative easing program that massively devalued the euro. Nonetheless, the CHF is still powerful and stable and currently (February 2022) is the 7th most traded currency in the world. A major recent event influencing its value is the 2015 removal of the euro floor peg.
GBPCHF Historical Performance
The GBP/CHF pair traded around 2.20 in the 2000s and even drifted towards 2.48 by early 2007. The effects of the 2007/8 Great Recession created a demand for Swiss francs, triggering a long-term downtrend on the GBPCHF, which tumbled to lows of circa 1.24 by mid-2011. In recent years, the pair has displayed low volatility and traded within the range of 1.13 and 1.38.
Major Bodies Influencing the GBPCHF – GBP/CHF Trading
Here are some of the factors to look out for when engaging in GBP to CHF trading:
Bank of England (BoE)
As a central bank, the BoE has the mandate of maintaining financial and monetary stability in the United Kingdom. This includes setting the bank rate (which it does every month), targeting inflation, and using tools such as quantitative easing. The BoE’s actions have a massive influence on the value of the GBP.
Swiss National Bank (SNB)
The SNB is the central bank of Switzerland, and its goal is to ensure price stability and create a monetary environment that is appropriate for economic growth. The SNB releases rates and statements of its financial direction quarterly. The bank is one of the most active players in the FX market, and it has routinely stepped up to protect the CHF as much as possible. Its most impactful decision in recent years is the removal of the euro-peg in 2015.
Swiss Federal Statistics Office (FSO)
The FSO is Switzerland’s national statistics office. Its mandate is to produce and publish relevant statistics that update its economy, population, and public life. For CHF traders, the most critical indicators include GDP, Consumer Price Index, the Unemployment Rate, and the Trade Balance.
GBPCHF Correlations
Understanding currency pair correlations help traders to avoid widening their risk exposure and identify possible opportunities in the market. GBPCHF is positively correlated with pairs such as the GBPJPY, GBPAUD, SGDJPY, GBPUSD, and GBPNZD. The pair has also displayed a negative correlation with pairs such as EURCZK, USDCZD, USDHUF, EURPLN, and CHFSGD.
