Bank of America Remains Bullish on British Pound Against Swiss Franc, Forecasting 1.20 Target by Mid-2025
Bank of America (BofA) has reaffirmed its optimistic outlook for the British Pound (GBP) against the Swiss Franc (CHF), projecting an appreciation to 1.20 by mid-2025. This forecast, maintained despite upcoming UK inflation data and the GBP/CHF pair nearing the upper bound of a specific options trading strategy, underscores BofA’s confidence in the pound’s strength over the next two years. The bank’s bullish stance is anchored in a combination of factors, including anticipated policy divergence between the UK and Switzerland, a fundamentally positive long-term outlook for the GBP, and the resilience of the UK’s service-dominated economy.
BofA highlights the divergence in monetary and fiscal policies between the UK and Switzerland as a key driver of the GBP/CHF exchange rate. While specifics on the anticipated divergence weren’t detailed in the original statement, it can be inferred that BofA expects the UK’s policy approach to be more accommodating or stimulative compared to Switzerland’s, potentially through lower interest rates or more expansive fiscal measures. This difference in policy direction can create attractive investment opportunities in the UK, driving demand for the GBP and consequently boosting its value against the CHF.
Furthermore, BofA emphasizes the UK’s robust service sector as a significant advantage. Representing a substantial portion of the British economy, the service sector is considered less susceptible to global trade fluctuations compared to manufacturing-heavy economies. This inherent resilience provides a buffer against potential international economic headwinds, offering greater stability and contributing to the GBP’s perceived strength. In contrast, Switzerland’s economy, with a greater reliance on manufacturing and exports, might be more vulnerable to global trade disruptions, potentially putting downward pressure on the CHF.
The bank’s positive outlook is also bolstered by its expectation of a less restrictive fiscal policy in the UK. This suggests that the government may prioritize economic growth through spending and tax policies that stimulate demand and investment. Such a fiscal stance can provide a cushion against economic shocks and support overall economic activity, further strengthening the GBP’s position. This contrasts with a potentially more conservative fiscal approach in Switzerland, further widening the policy divergence and potentially favoring the GBP.
BofA’s projection of the GBP/CHF reaching 1.20 by mid-2025 represents a significant increase from current levels. This ambitious target reflects the bank’s conviction in the underlying strength of the British economy and its favorable policy environment. The forecast remains unchanged despite the approaching release of the UK’s Consumer Price Index (CPI) data, suggesting that BofA anticipates the inflation figures will not significantly alter its positive outlook. The bank’s confidence also persists despite the GBP/CHF pair nearing the upper limit of a "ratio call spread," indicating that even potential short-term technical limitations in the options market are not deterring BofA’s long-term bullish view.
In summary, Bank of America maintains a strong positive outlook for the British Pound against the Swiss Franc, projecting a substantial appreciation to 1.20 by mid-2025. This bullish forecast is underpinned by several key factors: the anticipated divergence in monetary and fiscal policies between the two countries, the inherent strength and resilience of the UK’s service-dominated economy, and the expectation of a less restrictive fiscal policy in the UK. These factors, combined with BofA’s long-term positive view of the GBP, suggest a robust trajectory for the currency pair over the next two years, despite potential short-term market fluctuations and upcoming economic data releases. The bank’s unwavering confidence signals a strong belief in the underlying fundamentals of the British economy and its ability to outperform the Swiss Franc in the medium term.
