HOW TO TRADE FOREX: BRITISH POUND/SWISS FRANC (GBPCHF)
The GBP/CHF pair is a fascinating cross that pits the British pound, influenced by the complexities of the UK economy and its vulnerability to political changes, against the Swiss franc, known for its stability and status as a safe-haven asset in times of global uncertainty. Trading this pair requires understanding the factors that can drive volatility in the pound, including Brexit developments and monetary policy decisions, as well as an appreciation for the resilience of the Swiss franc during periods of risk aversion in the financial markets.
The key to successfully trading GBP/CHF is anticipating how geopolitical and economic events will influence risk perception and, consequently, the demand for the Swiss franc. Traders must stay informed about economic trends in Europe and globally and be prepared to act swiftly in response to news that could impact either of the two currencies. Depending on prevailing economic and political conditions, this pair offers opportunities in both bull and bear markets.
Top 10 Factors Affecting the British Pound - Swiss Franc Pair
Monetary Policy of the Bank of England (BoE) and the Swiss National Bank (SNB): These central banks' interest rate decisions and monetary policies directly impact the GBP/CHF pair. Divergences in policy direction can influence investment flows between the two currencies.
Interest Rate Differentials: The differences in interest rates between the UK and Switzerland affect capital flow. Higher rates in one region can attract investments in its currency, strengthening it against the other.
Economic Performance: Key economic indicators, such as GDP, inflation, and unemployment in the UK and Switzerland, affect the perception of relative economic strength and can influence the value of GBP/CHF.
Political and Economic Stability: Political and economic uncertainty, particularly in the UK with events like Brexit, can affect confidence in the GBP. Switzerland, known for its stability, may see its CHF strengthened in times of uncertainty.
Global Risk Aversion: The CHF is considered a safe-haven currency. In times of global uncertainty or financial crises, investors may move their capital to the Swiss franc, affecting GBP/CHF.
Trade Balance: Changes in the trade balance of the UK and Switzerland can influence the demand for GBP and CHF. A trade surplus can strengthen the national currency.
Capital and Investment Flows: Direct investment and portfolio movements between the UK and Switzerland can affect the demand for both currencies.
Fiscal Policies and Government Decisions: Significant changes in fiscal policy and government decisions in both economies can impact investor confidence and the strength of the currencies.
Inflation Expectations: Future inflation expectations and central bank responses to these expectations can affect monetary policy outlooks and, thereby, the value of the currencies.
Global Geopolitical and Economic Events: Economic crises, geopolitical tensions, and global developments can alter risk appetite and move GBP/CHF as investors seek safety or yield.
Related Assets Influencing the GBP/CHF Pair Dynamics
FTSE 100 Index: The strength of the FTSE 100 can indicate economic health in the UK, benefiting GBP against CHF.
SMI Index: Represents Switzerland's economic health. A strong performance in the SMI could strengthen CHF against GBP.
Gold: Although Switzerland is not a major gold producer, it is a global hub for gold trade. The price of gold can indirectly impact CHF due to Switzerland's perception as a haven.
Government Bonds Yields: Government bonds from the United Kingdom (Gilts) can influence currencies' risk and return perception. Increasing Gilt yields strengthen the GBP against the Franc.
Top FX Trading Apps
Opening a FX Trading Account
Select a Reliable Broker: Research and choose a broker that meets your expectations regarding trading tools. The security of your funds should be your priority.
Registration: Go to the broker's website and find the option to register a new account. You will need to provide basic personal information, such as name, email address, phone number, and, in some cases, an ID document to verify your identity.
Account Verification: Brokers require a verification process to comply with anti-money laundering regulations. This usually involves uploading documents such as a photo ID and proof of address.
Initial Deposit: You can make your first deposit once your account is verified. Brokers offer different payment methods, including bank transfers, credit/debit cards, electronic payment systems, and even cryptocurrencies. Returning to point 1, if you have specific needs like "I can only use brokers that accept payment method XYZ, " choose the broker that fits your needs.
Trading Platform: With your account funded, you can now access the broker's platform. If you haven't already, now is the time to familiarise yourself with the platform. Take advantage of the demo account if it's available. It allows you to practice your trading strategies, an advantage not only for beginners but also for experienced traders who are testing new strategies or simply seeing the execution and advanced features the trading app offers.
Set Up Your Trading Space: Customize the platform according to your preferences. This includes selecting the financial instruments you plan to trade, setting up charts, and implementing any technical indicators you regularly use.
Trading Strategy: If you haven't already, define your trading strategy, including risk management. Setting loss limits and profit targets can help you keep your trading disciplined and focused on your long-term goals.
First Trades: With everything in place, you can start trading.
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The Standard Account is an excellent choice for traders seeking a cost-effective forex experience. It offers a convenient entry point without minimum deposit requirements and commission-free trading. Traders can access all tradeable instruments and utilize user-friendly trading platforms, including PC, Mac, mobile, and Webtrader.
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Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any questions or concerns as to how a loss would affect your lifestyle.
