The bank noted that the SNB nearing the end of its rate-cutting cycle while the BoE has just begun its easing cycle this month and is expected to continue reducing rates gradually until the end of 2025.
The SNB, having initiated its rate cuts earlier than many of its peers, is anticipated to make one final cut in September before concluding its easing cycle. In contrast, the BoE’s recent start to rate cuts is expected to be executed in a gradual manner, with reductions each quarter.
The differing timelines of the central banks’ actions are seen as a factor that will influence GBP/CHF rates, potentially narrowing the yield difference and providing some support to the Swiss franc against the British pound.
Despite the SNB’s near completion of its rate cuts and the BoE’s ongoing reductions, UBS suggests that the strong services inflation in the UK and solid economic data from both the business and consumer sectors could mean that future rate cuts by the BoE will be moderate.
UBS predicts that the GBP/CHF will continue to trade around recent levels for the coming quarters, with 1.11 being the midpoint of the expected range. The currency pair has breached major support levels during its latest selloff, and UBS advises investors to monitor support levels at 1.07 and 1.06, with resistance at 1.15 and the May highs at 1.1670.
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