Pounds to Swiss Francs : GBP/CHF Rate Recovers as Institutional Investors Transfer Funds out of the Franc

Modified: Wednesday, 9 March 2011 08:36 BST - Written by John Cameron

STORY LINK Pounds to Swiss Francs : GBP/CHF Rate Recovers as Institutional Investors Transfer Funds out of the Franc

The Pound Swiss Franc exchange rate is 1.5079

Oil prices moved sharply downwards during yesterday’s European session as OPEC members openly commented on the possibility of an emergency meeting in order to discuss an increase in world oil supplies. Oil prices suffered further downside when the Saudi Arabia oil minister stated that, "Saudi Arabia will continue to reliably meet the world's petroleum needs." The price of a barrel of Brent Crude currently trades at just above $112 on the markets, having reached above $118 on Monday.

Equities markets also made gains yesterday, with the benchmark S&P 500 closing up by almost 1% on the day, signalling a pick-up in global risk sentiment.

These developments caused the Swiss Franc to lose ground against the majority of the 16 most traded currencies and talk in the markets was of a major move by Middle Eastern investors out of the Swiss Franc. It appears that a large portion of these Francs made their way into US Dollar denominated assets, as the Franc lost significant ground against the greenback on the day. The US is the largest consumer of crude oil in the world, so cooling oil prices have increased investors faith in the Dollar as a reserve currency.

Meanwhile, the Swiss Government’s Director of Labour, Serge Gaillard, commented yesterday that the relatively strong Franc may threaten Swiss jobs as 2011 progresses. Yesterday’s Swiss labour market data showed that Swiss unemployment fell from 3.7% to 3.6% last month, however Gaillard’s comments may consider achieving a weaker Franc to ne a policy objective if unemployment picks up.

GBP/CHF traded below 1.5000 earlier in the week, but rejected this key level. The next target on the upside is 1.5696, which is the 2011 high. Increased appetite for risk causing transfers of funds out of the Franc could see GBP/CHF trend upwards towards this resistance.

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