GBP/CHF Interest Rates up But Gold Supporting CHF
Updated
Both the UK and Switzerland are sort of rebels as they’ve both disregarded the EU in one way or the other. This makes them unique to the rest of the world but quite similar to each other. Here is why you should trade the GBPCHF currency pair:
GOLD PRICE
Across the seven seas, Switzerland’s currency, the Swiss franc, also has a strong link with gold. Using the dollar as base currency, the USD/CHF usually climbs when the price of gold slides.
Conversely, the pair dips when the price of gold goes up.
Unlike the Australian dollar, the reason why the Swiss franc moves along with gold is that more than 25% of Switzerland’s money is backed by gold reserves.
Gold has a negative correlation with USD/CHF.
When gold goes up, USD/CHF goes down. When gold goes down, USD/CHF goes up.
Isn’t that awesome?
Keep in mind that that this correlation is not set in stone and may change in the future.
So the Gold price has a positive correlation with AUD and CHF.
Market Correlations
The correlations between currency pairs like the GBPCHF and other assets in the market are a great reason to trade them. This is evident in the case of the British Pound, which has strong correlations with commodities such as machinery and transport. These are its most popular exports. It is especially evident in the instance of the Swiss franc, which has strong linkages with goods such as medicines and watches. This is due to their involvement in the exportation of these valuable products. As a result, trading this pair becomes even easier since if we understand the direction of the commodities market, we can easily grasp the direction of the GBPCHF market as well. We’ll go over how these commodities will affect the movement of the GBPCHF currency pair in greater detail later.
Market Predictability
Identifying market conditions for GBPCHF seems to be rather clear cut. This is due to the fact that they are most influenced by developments in their respective countries, namely the United Kingdom and Switzerland. Because the USD is the standard currency for global transactions, any changes anywhere in the world would have an impact on a pair including the USD. Similarly, any changes that occur anywhere in the European Union’s 28 member countries would have an impact on a pair that contains the Euro. As a result, maintaining track of every location that may have an impact on a currency pair becomes rather difficult. Forex pairs that are exclusively tied to a certain region, such as GBPCHF, are much easier to forecast since we just need to assess their individual nations for economic changes.
Interest Rates
The United Kingdom is well-known for its high interest rates set by the Bank of England. These high interest rates are far higher than those of other market players like the United States and Australia. Switzerland has substantially lower interest rates than the United Kingdom. The Swiss National Bank is responsible for Switzerland’s low interest rates.
Their economy is relatively steady, which is why their interest rates are so low. As a result of these interest rates, traders are driven to the GBPCHF currency pair due to its high interest yields. Because of the wide disparity in interest rates, this combination delivers high returns. When trading this currency pair, traders usually employ a carry trade due to the high rewards. Carry trading is the practice of selling a low-interest-rate currency in order to buy one with a higher interest rate.
GBPCHF Trading Tips
As we’ve mentioned previously, GBPCHF is quite unique to others but very similar to each other. This places them in quite a tricky spot as their markets would be facing very unique circumstances. Here are a few tips for trading the GBPCHF currency pair:
Trade Timings
Although you can generally trade the GBPCHF currency pair anytime as long as the market is open, there are certain timings that make the market conditions perfectly ideal for this dynamic duo. The perfect time to trade this pair is when the London market is open. This would be considered between 8 am and 4 am GMT. The reason this timing is so ideal is because if any changes were to occur in the economic or monetary policies of these individual countries, they would occur within this time zone. And so, this is why it is important to keep in mind trade timings when trading the GBPCHF currency pair.
Carry Trading
Carry trade is the practice of borrowing a low-interest-rate currency to invest in a higher-interest-rate currency. When using the carry trade strategy, you must first decide on the funding and asset currencies. The currency traded in the transaction is known as the funding currency. This currency often has a lower interest rate. Historically, the CHF has been a popular funding currency. Selling the CHF while simultaneously buying the GBP, is critical for successful GBPCHF carry trading. When this happens, you will be paid interest based on the difference in interest rates between GBP and CHF which is quite a significant amount.
Range Trading
The technique of determining when to enter a trade by analyzing support and resistance levels is known as range trading. The highest points on a particular chart are the resistance levels. Similarly, the lowest points on a particular chart represent support levels. Understanding the location of these highs and lows is critical to the range trading approach. For instance, if the price is approaching a resistance level and you believe it will hold, you may place a SELL order. If the price, on the other hand, reaches a level of support that you believe will hold, you may make a BUY transaction. If the price goes below the support level, you can begin a short position because the support level will no longer be valid. Similarly, if the price continues to rise over the resistance level, you may enter the market long since the resistance level will be invalidated.
Factors Affecting GBPCHF
Both the UK and Switzerland are quite similar to each other. Despite this, they are each known for their own reasons and have greatly benefitted from them respectively. Here are a few factors impacting the GBPCHF currency pair:
The Pharmaceuticals Industry
Switzerland is one of the world’s largest exporters of medicinal products. These mostly consist of medications, although other pharmaceutical items are also provided. Any changes in demand for these products have a considerable influence on the value of Switzerland’s economy. If worldwide demand for drugs and other medicines rises, Switzerland will be able to export them more often, improving the value of the CHF. As a result, the value of the GBPCHF currency pair would plummet. Similarly, if the worldwide demand for drugs and other pharmaceuticals falls, Switzerland will be unable to export as much as usual, leading the CHF to lose value. As a result, the value of the GBPCHF currency pair would increase.
The Transport Industry
The United Kingdom is a leading exporter of automobiles and auto parts. As a result, its economy is strongly dependent on worldwide demand for these goods. Any changes in demand for transportation vehicles will have an immediate impact on the pound’s value. If demand for automobiles declines, the UK will not export as many of them, causing the value of the GBPCHF to fall. Similarly, if worldwide demand for autos increases, the UK will export them more frequently, and the value of the GBPCHF will rise.
The Watch Industry
Switzerland is also well-known for its timepieces and its exports of them as well. They produce some of the highest-quality watches in the world. Their watches are quite popular abroad, accounting for a sizable share of their exports. Any changes in demand for these products have a substantial influence on the Swiss economy’s value. If worldwide demand for watches rises, Switzerland will be able to export them more often, raising the value of the CHF. As a result, the GBPCHF currency pair’s value would plummet. Similarly, if worldwide demand for watches falls, Switzerland will be unable to export as many as it does now, leading the CHF to lose value. As a result, the GBPCHF currency pair’s value would appreciate in value.
The Machinery Industry
The United Kingdom is a leading exporter of electrical machinery. As a result, its economy is strongly dependent on worldwide demand for these goods. Any changes in demand for electrical machinery will have an immediate impact on the pound’s value. If demand for electrical machinery declines, the UK will not export as many of them, causing the value of the GBPCHF to fall. Similarly, if worldwide demand for electrical machinery increases, the UK will export them more frequently, and the value of the GBPCHF will rise.
Financial Institutions
Both the Bank of England and the Swiss National Bank are majorly responsible for any instability in the GBPCHF marketplace. The BOE and SNB release monthly reports and statements regarding updates to any policy changes. These reports also display the economic and monetary forecasts for the upcoming short-term. Any positive results from the BOE will have a positive impact on the GBPCHF currency pair.
However, any positive results from the SNB will have an inverse impact on the GBPCHF currency pair. The representatives of these individual banks also hold speeches frequently where they explain these results in more detail. These speeches are just, if not more, important in determining the direction of the GBPCHF market. From BOE, Andrew Bailey who is the Governor of the institution is highly looked upon for his speeches. From SNB, Thomas Jordan who is the Governor of the institution is highly looked upon for his speeches.
Unemployment Rate
The unemployment rate has a considerable influence on the GBPCHF currency pair’s value. Switzerland is renowned for having a very low unemployment rate. Switzerland has one of the world’s most stable economies. Any changes in the number of citizens employed in a country will have an impact on the economy. This is because the more people who are unemployed, the more the government must pay for them from its own resources. This significantly reduces the value of a country’s economy. If Switzerland’s unemployment rate rises, the CHF will decline in value, leading the GBPCHF currency pair to gain in value. Similarly, if the unemployment rate in the United Kingdom rises, the value of the GBP lowers, leading the GBPCHF currency pair to decline as well.
GOLD PRICE
Across the seven seas, Switzerland’s currency, the Swiss franc, also has a strong link with gold. Using the dollar as base currency, the USD/CHF usually climbs when the price of gold slides.
Conversely, the pair dips when the price of gold goes up.
Unlike the Australian dollar, the reason why the Swiss franc moves along with gold is that more than 25% of Switzerland’s money is backed by gold reserves.
Gold has a negative correlation with USD/CHF.
When gold goes up, USD/CHF goes down. When gold goes down, USD/CHF goes up.
Isn’t that awesome?
Keep in mind that that this correlation is not set in stone and may change in the future.
So the Gold price has a positive correlation with AUD and CHF.
Market Correlations
The correlations between currency pairs like the GBPCHF and other assets in the market are a great reason to trade them. This is evident in the case of the British Pound, which has strong correlations with commodities such as machinery and transport. These are its most popular exports. It is especially evident in the instance of the Swiss franc, which has strong linkages with goods such as medicines and watches. This is due to their involvement in the exportation of these valuable products. As a result, trading this pair becomes even easier since if we understand the direction of the commodities market, we can easily grasp the direction of the GBPCHF market as well. We’ll go over how these commodities will affect the movement of the GBPCHF currency pair in greater detail later.
Market Predictability
Identifying market conditions for GBPCHF seems to be rather clear cut. This is due to the fact that they are most influenced by developments in their respective countries, namely the United Kingdom and Switzerland. Because the USD is the standard currency for global transactions, any changes anywhere in the world would have an impact on a pair including the USD. Similarly, any changes that occur anywhere in the European Union’s 28 member countries would have an impact on a pair that contains the Euro. As a result, maintaining track of every location that may have an impact on a currency pair becomes rather difficult. Forex pairs that are exclusively tied to a certain region, such as GBPCHF, are much easier to forecast since we just need to assess their individual nations for economic changes.
Interest Rates
The United Kingdom is well-known for its high interest rates set by the Bank of England. These high interest rates are far higher than those of other market players like the United States and Australia. Switzerland has substantially lower interest rates than the United Kingdom. The Swiss National Bank is responsible for Switzerland’s low interest rates.
Their economy is relatively steady, which is why their interest rates are so low. As a result of these interest rates, traders are driven to the GBPCHF currency pair due to its high interest yields. Because of the wide disparity in interest rates, this combination delivers high returns. When trading this currency pair, traders usually employ a carry trade due to the high rewards. Carry trading is the practice of selling a low-interest-rate currency in order to buy one with a higher interest rate.
GBPCHF Trading Tips
As we’ve mentioned previously, GBPCHF is quite unique to others but very similar to each other. This places them in quite a tricky spot as their markets would be facing very unique circumstances. Here are a few tips for trading the GBPCHF currency pair:
Trade Timings
Although you can generally trade the GBPCHF currency pair anytime as long as the market is open, there are certain timings that make the market conditions perfectly ideal for this dynamic duo. The perfect time to trade this pair is when the London market is open. This would be considered between 8 am and 4 am GMT. The reason this timing is so ideal is because if any changes were to occur in the economic or monetary policies of these individual countries, they would occur within this time zone. And so, this is why it is important to keep in mind trade timings when trading the GBPCHF currency pair.
Carry Trading
Carry trade is the practice of borrowing a low-interest-rate currency to invest in a higher-interest-rate currency. When using the carry trade strategy, you must first decide on the funding and asset currencies. The currency traded in the transaction is known as the funding currency. This currency often has a lower interest rate. Historically, the CHF has been a popular funding currency. Selling the CHF while simultaneously buying the GBP, is critical for successful GBPCHF carry trading. When this happens, you will be paid interest based on the difference in interest rates between GBP and CHF which is quite a significant amount.
Range Trading
The technique of determining when to enter a trade by analyzing support and resistance levels is known as range trading. The highest points on a particular chart are the resistance levels. Similarly, the lowest points on a particular chart represent support levels. Understanding the location of these highs and lows is critical to the range trading approach. For instance, if the price is approaching a resistance level and you believe it will hold, you may place a SELL order. If the price, on the other hand, reaches a level of support that you believe will hold, you may make a BUY transaction. If the price goes below the support level, you can begin a short position because the support level will no longer be valid. Similarly, if the price continues to rise over the resistance level, you may enter the market long since the resistance level will be invalidated.
Factors Affecting GBPCHF
Both the UK and Switzerland are quite similar to each other. Despite this, they are each known for their own reasons and have greatly benefitted from them respectively. Here are a few factors impacting the GBPCHF currency pair:
The Pharmaceuticals Industry
Switzerland is one of the world’s largest exporters of medicinal products. These mostly consist of medications, although other pharmaceutical items are also provided. Any changes in demand for these products have a considerable influence on the value of Switzerland’s economy. If worldwide demand for drugs and other medicines rises, Switzerland will be able to export them more often, improving the value of the CHF. As a result, the value of the GBPCHF currency pair would plummet. Similarly, if the worldwide demand for drugs and other pharmaceuticals falls, Switzerland will be unable to export as much as usual, leading the CHF to lose value. As a result, the value of the GBPCHF currency pair would increase.
The Transport Industry
The United Kingdom is a leading exporter of automobiles and auto parts. As a result, its economy is strongly dependent on worldwide demand for these goods. Any changes in demand for transportation vehicles will have an immediate impact on the pound’s value. If demand for automobiles declines, the UK will not export as many of them, causing the value of the GBPCHF to fall. Similarly, if worldwide demand for autos increases, the UK will export them more frequently, and the value of the GBPCHF will rise.
The Watch Industry
Switzerland is also well-known for its timepieces and its exports of them as well. They produce some of the highest-quality watches in the world. Their watches are quite popular abroad, accounting for a sizable share of their exports. Any changes in demand for these products have a substantial influence on the Swiss economy’s value. If worldwide demand for watches rises, Switzerland will be able to export them more often, raising the value of the CHF. As a result, the GBPCHF currency pair’s value would plummet. Similarly, if worldwide demand for watches falls, Switzerland will be unable to export as many as it does now, leading the CHF to lose value. As a result, the GBPCHF currency pair’s value would appreciate in value.
The Machinery Industry
The United Kingdom is a leading exporter of electrical machinery. As a result, its economy is strongly dependent on worldwide demand for these goods. Any changes in demand for electrical machinery will have an immediate impact on the pound’s value. If demand for electrical machinery declines, the UK will not export as many of them, causing the value of the GBPCHF to fall. Similarly, if worldwide demand for electrical machinery increases, the UK will export them more frequently, and the value of the GBPCHF will rise.
Financial Institutions
Both the Bank of England and the Swiss National Bank are majorly responsible for any instability in the GBPCHF marketplace. The BOE and SNB release monthly reports and statements regarding updates to any policy changes. These reports also display the economic and monetary forecasts for the upcoming short-term. Any positive results from the BOE will have a positive impact on the GBPCHF currency pair.
However, any positive results from the SNB will have an inverse impact on the GBPCHF currency pair. The representatives of these individual banks also hold speeches frequently where they explain these results in more detail. These speeches are just, if not more, important in determining the direction of the GBPCHF market. From BOE, Andrew Bailey who is the Governor of the institution is highly looked upon for his speeches. From SNB, Thomas Jordan who is the Governor of the institution is highly looked upon for his speeches.
Unemployment Rate
The unemployment rate has a considerable influence on the GBPCHF currency pair’s value. Switzerland is renowned for having a very low unemployment rate. Switzerland has one of the world’s most stable economies. Any changes in the number of citizens employed in a country will have an impact on the economy. This is because the more people who are unemployed, the more the government must pay for them from its own resources. This significantly reduces the value of a country’s economy. If Switzerland’s unemployment rate rises, the CHF will decline in value, leading the GBPCHF currency pair to gain in value. Similarly, if the unemployment rate in the United Kingdom rises, the value of the GBP lowers, leading the GBPCHF currency pair to decline as well.
Note
All in all, Swiss productivity has recentlybeen more in line with European than the more dynamic US productivity
Note
Gold firmsNote
GBP/CHF is currently at 1.1198 in a range and looking for a breakout of slope support. We are in the start of a channel, and we are looking for a continuation to the 1.000 Fibo at 1.1149 with a further target the ATR target at the 1.1125 area.Watch the USDX for direction. The average daily true range (ATR) for the pair is 69 pips per day and it’s 180 day average is 82 pips per day. USDX is currently moving up but at a range top-watch for it to short.
Note
The Swiss franc declined, losing about 1% to 0.8920 after a fresh batch of macroeconomic data. The unemployment rate remains at 1.9%, a historic low. But at the same time, inflation is surprising, falling short of forecasts.Note
The consumer price index was virtually unchanged over the past month, and the annual inflation rate fell from 2.9% to 2.6%, while economists, on average, expected growth of 0.2% m/m and 2.8% y/y, respectively. The current inflation rate is the lowest in the last 11 months and very close to the SNB target.Note
The consumer price index was virtually unchanged over the past month, and the annual inflation rate fell from 2.9% to 2.6%, while economists, on average, expected growth of 0.2% m/m and 2.8% y/y, respectively. The current inflation rate is the lowest in the last 11 months and very close to the SNB target.Note
What is the debt ceiling?The federal government operates in a deficit, spending more than it brings in with taxes, so it’s forced to borrow money to pay for everything from the salaries of armed forces and federal employees to Social Security
Congress has the power of the purse strings, letting it set a limit on what the government can borrow to pay for expenses (the debt ceiling). The current limit is $31.4 trillion.
What happens if the debt ceiling is not raised or suspended?
When does the U.S. hit spending limit?
How many times has the debt ceiling been raised?
How much has the U.S. debt increased in the past 20 years?
What caused the debt?
Answers here
Note
After a spectacular run of outperformance since February, UK macro data have generally underwhelmed since mid-May, according to the Economic Surprise Index. Nevertheless, the strong-than-expected data since the start of the year has prompted upgrades to the economic outlook for the current year. Meanwhile, the slower-than-expected moderation in UK inflation in April has raised the odds of a Bank of England (BOE) rate hike this month.BOE hiked its benchmark rate by 25 basis points in May after pausing in April, and the market is pricing in almost four rate hikes by the end of the year, taking the terminal rate to 5.41% from 4.50% currently. The next week bring UK jobs, GDP, and manufacturing output data ahead of the BOE meeting on June 22, which could stir things up a bit for GBP. Until then, the pound could be due for a breather after a spectacular run against some of its peers.
Note
GOLD STRONG BUY , short term correction coming soon
Note
Gold long going to above 2050LONG
Gold Price Analysis: Testing Support Levels Amidst Consolidation and Breakout Attempts
Technical analysis reveals a retracement in gold, testing key support zones and indicating a healthy consolidation phase before an expected continuation of the uptrend.
Gold, FX Empire
Gold Forecast Video for 19.06.23 by Bruce Powers
Gold rises to a three-day high of 1,986 on Friday before pulling back. It attempted to breakout above the top boundary trendline of a small symmetrical triangle consolidation pattern but is now on track to close below it and within the consolidation range.
Attempting to Break Up yet Remains in Consolidation Range
So far, Thursday’s test of the 100-Day EMA with a day’s low of 1,925 has held up but further signs of strength are needed. Gold briefly dropped below the 100-Day line earlier in the session on Thursday but managed to close strong, back above it and near the high of the day. The 100-Day EMA is now at 1,940.
Further Signs of Strength are Needed
Further signs of strength are needed to indicate whether yesterday’s low completes the retracement or further tests will occur. This week’s candlestick pattern is set to close as a bullish doji hammer. Next week an upside breakout signal will occur on a move above the high at 1,971, and the breakout is confirmed on a daily close above that high. Following a move above that high the next weekly resistance levels are 1,973, 1,983, and 1,985. A subsequent daily close above each price level will confirm strength, otherwise some resistance might be seen again around those levels.
If Lows Tested Again
If lower prices occur before a continuation higher the two potential support zones are around the 61.8% Fibonacci retracement at 1,912, followed by the 200-Day EMA at 1,894. The 200-Day EMA was tested as support with a double bottom in the first quarter of this year price reversed higher from there.
Uptrend Intact
The current retracement in gold is a test of support around previous high swing high of 1,960 from early-February. So far, the retracement is normal and healthy for the uptrend. Consolidation has been occurring at the 50% retracement area as well as the 100-Day EMA. Notice that there is a greater distance between the 100-Day EMA and 200-Day than what was seen in February. It reflects an improving trend. Once this retracement is complete, all signs are that gold should continue higher.
Gold held above $1,950 an ounce on Friday after gaining 0.7% in the previous session, benefiting mainly from the dollar’s weakness as the Federal Reserve paused its tightening campaign at a time other major central banks are still raising interest rates. Still, the metal remains close to three-month lows as the Fed hinted at two more quarter-point rate increases this year, while the European Central Bank delivered another 25 basis point rate hike on Thursday and signaled further tightening. The Bank of England is also set to raise rates again at its June policy meeting, a month marked by surprise rate increases from the Reserve Bank of Australia and the Bank of Canada. Meanwhile, the People’s Bank of China lowered key short-term interest rates this week for the first time in ten months, while the Bank of Japan maintained its ultra-easy monetary policy on Friday.
Daily bullish
4H Bullish
34min Bullish
Gold is mostly traded on the OTC London market, the US futures market (COMEX) and the Shanghai Gold Exchange (SGE). The standard future contract is 100 troy ounces. Gold is an attractive investment during periods of political and economic uncertainty. Half of the gold consumption in the world is in jewelry, 40% in investments, and 10% in industry. The biggest producers of gold are China, Australia, United States, South Africa, Russia, Peru and Indonesia. The biggest consumers of gold jewelry are India, China, United States, Turkey, Saudi Arabia, Russia and UAE. The gold prices displayed in Trading Economics are based on over-the-counter (OTC) and contract for difference (CFD) financial instruments. Our gold prices are intended to provide you with a reference only, rather than as a basis for making trading decisions. Trading Economics does not verify any data and disclaims any obligation to do so.
Note
Gold is Being Pulled Between a Hawkish Fed and New Geopolitical ConcernsUS Housing Surprises, Fed Pauses but Remains Hawkish
Last week, US economic data revealed a much stronger than expected housing market, with the NAHB Housing Market Index surpassing expectations to hit its highest level since July of last year. New building permits also beat market expectations, and new housing starts surged to their highest level since May 2022.
Last month, we reviewed the three possibilities of a Federal Reserve pivoting to rate cuts, continuing to hike, or pausing. The June FOMC meeting delivered our most likely scenario of a pause, which we presented as one of the better cases for gold, at least in the short term.
However, what markets received from the June FOMC meeting was a hawkish pause, in which no action was taken, while Chair Powell renewed his hawkish rhetoric, underlining his commitment to the task of bringing down inflation.
In a busy week for FOMC speakers, markets had the opportunity to digest comments from a total of six FOMC members. Jerome Powell also made his semi-annual trip to Capitol Hill, testifying before the House Financial Services Committee, and Senate Banking Committee, where he all-but confirmed that more rate hikes are in store and stated that “we don’t see rate cuts any time soon.”
Gold’s Reaction
The result of this pull between the resilience of the US economy plus a hawkish Fed on the one hand, and growing geopolitical uncertainty on the other, has resulted in muted price action despite the overall bearish trend.
We’re seeing this among investors at HYCM as well, for whom gold is one of the most popular assets this year. Positioning suggests current price action could be a period of short-term profit-taking within a longer-term bullish view.
We can see this reflected in gold’s chart. Between June 20 and 22, which saw the release of US housing data and FOMC speeches, gold prices declined by almost 2.4%.
Note
trade stil open bearish
Note
trade is open
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.