UBS expects the GBP/CHF currency pair to trend higher in the months ahead as support for the Swiss franc from safe-haven demand weakens. In a recent currency outlook, the bank outlined several forces that underpin its view for a gradual appreciation of sterling versus the franc.
Central to UBS's assessment is the removal from market pricing of a budget-related risk premium that had previously been a drag on the British pound. The firm also points to recent positive economic data coming out of the UK, which it says has provided additional backing for sterling.
Beyond these developments, UBS emphasized the role of interest rate differentials in shaping investor preferences. The bank notes that the yield gap between UK and Swiss assets currently exceeds 3.5% - a spread it describes as large enough to make the pound comparatively more appealing for investors focused on returns. According to the UBS analysis, that yield advantage establishes a fundamental rationale for expecting GBP/CHF appreciation.
UBS's projection envisions a gradual move higher in the GBP/CHF spot rate as the influence of safe-haven flows into the Swiss franc diminishes. The bank frames the expected path as a function of both the removal of the market's budget risk premium for the pound and the persistent yield differential that favors sterling.
The bank's outlook links three key elements: the fading of safe-haven demand for the Swiss franc, the resolution of a budget-related premium that had pressured the pound, and supportive UK economic indicators. Taken together, UBS presents these factors as the basis for its forecast that sterling will gain against the franc over the coming months.
Implications for markets: The view from UBS, if realized, would have direct consequences for foreign exchange participants, cross-border investment flows, and investors prioritizing carry from yield differentials. The dynamics highlighted by the bank could also influence positioning in fixed-income assets where relative yields are a key consideration.