The CHF has a fundamental bearish bias as the general risk tone is positive. The large amount of COVID-19 vaccines being rolled out across the globe is providing a supportive environment for prolonged CHF weakness. The large levels of monetary policy support and fiscal stimulus packages are further supportive for CHF weakness going forward.

The Bank of England’s Vlieghe has taken a more hawkish shift from his neutral perspective. The key comment was that he expected the UK to transition out of the furlough scheme more smoothly than expected and that a somewhat earlier rate rise would be appropriate. This is a hawkish shift from a neutral BoE member and a shift from his earlier position on the path of the UK’s monetary policy. This should support the GBP going forward into the BoE’s meeting at the end of June.

Therefore, there is a near term buying bias for the GBPCHF.

Key Trade Risks:

• The main risk to this trade is from any risk-off tones which will strengthen the CHF
• A breakdown in the fast UK economic recovery will also invalidate this outlook.
• The emergence of a COVID-19 vaccine-resistant variant will invalidate this outlook.