UBS Switzerland AG expects the GBP/CHF currency pair to face continued downward pressure in the near term, with a recovery anticipated from the second half of 2026 and carrying into 2027, according to strategists Constantin Bolz and Clémence Dumoncel.
The bank cites two principal forces shaping the cross-rate. On the UK side, the pound is constrained by the Bank of England's ongoing easing cycle and persistent political uncertainty within the Labour Party. On the Swiss side, the franc has benefited from safe-haven demand amid heightened geopolitical risks and relatively resilient Swiss economic readings.
UBS adjusted its short-term quarter-end projections for GBP/CHF, trimming its June and September forecasts to 1.06 from a previous 1.08. The bank left its December target unchanged at 1.07 and published a fresh projection for March 2027, placing that level at 1.08.
The strategists note that sterling's near-term weakness is reinforced by domestic political factors. With local and regional elections scheduled for May and monetary easing likely to continue through June, UBS does not expect the pound to materially outperform until political clarity emerges and the BoE approaches the end of its easing cycle.
Meanwhile, the Swiss franc continues to draw safe-haven flows, a dynamic UBS says is driven by external developments. Swiss inflation is reported at 0.1% year-over-year in February, underscoring a subdued domestic price environment that supports the franc's status as a defensive currency.
UBS argues that the downside in GBP/CHF is likely to be limited by the Swiss National Bank's determination to curb excessive franc appreciation. Looking beyond the near term, the bank anticipates that safe-haven inflows into CHF should ease gradually, allowing other economic fundamentals to exert greater influence on the exchange rate.
Another factor noted by UBS is the franc's low yield, which makes it a commonly used funding currency in carry trades. As UK-specific political risks dissipate, UBS expects GBP/CHF to trend higher, with the pair also benefiting from nearly a 4% carry, according to the bank.
UBS's valuation gauges place the purchasing power parity (PPP) level for GBP/CHF at 1.13, while its trend-extrapolated equilibrium rate stands at 1.00. The strategists point to the 2022 lows just below 1.02 as the next support area, and identify around 1.08 and 1.10 as resistance levels to monitor.
Key points
- UBS forecasts GBP/CHF to remain subdued near term, with recovery expected in H2 2026 and into 2027.
- Bank of England easing and UK political uncertainty are principal headwinds for the pound; safe-haven flows and resilient Swiss data support the franc.
- UBS adjusted quarter-end targets to 1.06 for June and September, kept December at 1.07, and set a March 2027 forecast at 1.08.
Risks and uncertainties
- Continued monetary easing by the Bank of England through June could keep sterling underperforming - this impacts UK-focused assets and currency-sensitive sectors.
- Heightened geopolitical risks sustaining safe-haven flows into the Swiss franc could limit GBP/CHF upside - this affects forex markets and carry-trade strategies.
- Political uncertainty in the UK ahead of May local and regional elections may delay sterling's recovery until the electoral outcome and clarity over BoE policy occur.