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Pound Sterling to Swiss Franc (GBP/CHF) Exchange Rate Edges Higher as Safe Haven Demand Softened

July 22, 2014 - Written by Tim Boyer

GBP/CHF Update 23/07/2014 - The Pound to Swiss Franc exchange rate edged higher on Wednesday as demand for safe haven assets softened after investors deemed the latest round of EU sanctions against Russia will not have much of a negative impact upon the wider global economy. The US also stopped short of pointing the finger squarely at Russia for the downing of MH-17 and said that the tragic incident was an accident by pro-Russian separatist rebels. Sanctions are not likely to be as harsh as some have demanded due to the EU and US leaders not wanting to have their own economies negatively impacted.

The Pound Sterling to Swiss Franc exchange rate made gains on Tuesday after data showed that Switzerland’s trade balance surplus narrowed more than forecast last month as demand from the Eurozone faltered.

According to the data released by the Swiss Federal Customs Administration, Switzerland’s trade surplus came is less than economists had expected for June as imports increased at a faster pace than exports. The data showed that the Alpine nation’s trade surplus came in at CHF 1.38 billion in June, less than the CHF 2.78 billion expected by economists.

The report also showed that the nation’s imports increased by 10.5% month-on-month to CHF 15.49 billion last month. Exports did increase but at a slower than expected rate of 1.2% to CHF 16.97 billion. Exports of Swiss made watched increased by 1.4% on a year on year basis last month. On an annual basis the country’s trade surplus fell by CHF 1.4 billion with exports rising by 2.2% and imports by 7.8%.

After the data the Swiss Franc weakened against the Pound, Euro and US Dollar.

Further losses for the currency were restrained somewhat due to the Franc’s status as a safe haven currency. With the Middle East and Ukraine in turmoil investors have been jittery in the markets.

In Ukraine the war between pro-Western Ukrainian soldiers and pro-Russian separatist rebels escalated today as a large scale assault upon the rebel capital of Donetsk intensified. Ukrainian heavy weapons and artillery launched attacks. Meanwhile concerns over further sanctions being imposed against Russia after the shooting down of Malaysian airliner MH-17 have increased demand for safer assets.

In Gaza fighting between the Israeli army and militants from Hamas raged on with the death toll climbing. Nearly 600 Palestinians and 29 Israelis have been killed since Israel launched its offensive two weeks ago.

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In Syria and Iraq the Islamic State (IS) has continued with its conquest of the region. According to activists from the Syrian Observatory for Human Rights more than 700 people were killed in just two days, the bloodiest 48 hours of the war in that nation so far. In Iraq IS continued to gain ground.

The Pound meanwhile eased against the US Dollar after a report showed that the UK’s public finances showed a bigger deficit than expected last week suggesting that the coalition government is slipping away from its fiscal targets.

According to the Office for National Statistics, UK net burrowing was £11.4 billion compared with £11.5 billion in the previous year. Economists had been forecasting for a figure of 11.1 billion. The data also showed that government revenue increased by 4.7% and spending rose by 3.9%.

“Chancellor of the Exchequer George Osborne will be fervently hoping that public finances do improve over the coming months as it would not only reflect well on the government’s stewardship of the economy but also facilitate the offering of a few sweeteners to the electorate before the May 2015 general election,” said an economist from IHS Global Insights.

The Pound was likely to make further gains on Tuesday if the latest CBI trends orders data was to come in positively. A solid report will support expectations for a solid UK GDP report on Friday.

The GBP CHF exchange rate today stands at 1.53698.
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