"We therefore think short GBP/CHF is the best relative value expression of policy divergence—essentially long EUR/GBP with a “BTP hedge” - Goldman Sachs.

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An eight percent fall against a resurgent Swiss Franc is already one of the Pound's heaviest losses of the year but it could be likely to remain under pressure in the weeks ahead, according to strategists at Goldman Sachs, who've suggested that clients consider selling GBP/CHF.

Sterling had risen against only four currencies in the G20 basket for the year on Tuesday and had ceded significant ground to some others including a Swiss Franc that rose from rags to riches after the Swiss National Bank (SNB) first shifted to a hawkish monetary policy stance in June.

Since then the SNB has raised its interest rate from -0.75% to 1% and intervened in the currency market to offset the inflationary impact of rising import costs by lifting Swiss exchange rates in a policy response that has helped the Franc rise rapidly through the major currency performance rankings for 2022.

But growing policy differences between the SNB and Bank of England (BoE) are likely to see GBP/CHF remain under pressure in the weeks ahead, according to strategists at Goldman Sachs, who told clients last Friday that GBP/CHF is likely to fall back to 1.10 over the coming weeks.

"The SNB confirmed that it has been intervening in the FX market to keep the Franc from depreciating. The announcement reinforces that there has been a regime change at the SNB, and corroborates our view that FX remains an important part of the policy mix," says Michael Cahill, a G10 FX strategist at Goldman Sachs.

Above: Pound to Swiss Franc rate shown at daily intervals with selected moving-averages. Click image for closer inspection.

"At the same time, officials at the Bank of England once again hiked in a “reluctant” fashion despite very high inflation," Cahill and colleagues write in a Friday research briefing.

Switzerland's Franc was one of the bigger fallers for the year before June but had claimed second place in the rankings by the time Chairman Thomas Jordan said last week that inflation would remain above the SNB's target until 2024 without higher interest rates or other actions.

Meanwhile, two out of nine on the BoE's Monetary Policy Committee voted to leave Bank Rate unchanged at 3% last Thursday, overshadowing a majority vote in favour of a ninth increase in Bank Rate to leave the benchmark for borrowing costs at 3.5% for year-end.

"In our view, this reveals a continued preference to allow the currency to act as the primary adjustment mechanism," Cahill says.

"We therefore think short GBP/CHF is the best relative value expression of policy divergence," he adds.

Dovish dissent on the MPC, double-digit inflation in the UK and the Franc's helping hand from the SNB are all part of why Goldman Sachs sees GBP/CHF as likely to fall back to 1.10 in the weeks ahead.

Cahill and colleagues also forecast deeper losses next year in which the Pound is seen retreating to 1.0810 and 1.0580 over three and six-month horizons.

Above: Pound to Swiss Franc rate shown at weekly intervals. Click image for closer inspection. If you are looking to protect or boost your international payment budget you could consider securing today's rate for use in the future, or set an order for your ideal rate when it is achieved, more information can be found here.