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Pound Sterling to Swiss Franc Exchange Rate: GBP CHF Declines on Profit Taking, Swiss Economy Stagnates

September 2, 2014 - Written by Toni Johnson

The Pound Sterling (GBP) fell broadly against most of its major peers on Tuesday as investors embarked on a round of profit taking ahead of the release of data, which was likely to show that the UK economy is experiencing a slowdown.

Also weighing upon the Pound was the publication of weaker than forecast UK manufacturing data. The Markit compiled Purchasing Managers Index (PMI) for the UK’s Manufacturing sector from July’s figure of 54.8 to a 14-month low of 52.5. The data raised concerns that the UK economy is slowing as geopolitical factors and a stagnating Eurozone weigh.

"It is becoming increasingly evident that UK industry is not immune to the impacts of rising geopolitical and global market uncertainty," said Rob Dobson, senior economist at Markit. "That's especially true when they affect economic growth and business confidence in our largest trading partner, the Eurozone."

On Tuesday, the Swiss Franc was holding ground against the weakened Pound even as economic data showed that the Swiss economy stagnated in the second quarter of the year as Eurozone weakness saw a drop in the Alpine nation’s exports.

The country’s GDP was unchanged in the second quarter a contrast to the 0.5% expansion seen in the first quarter of 2014. With the Eurozone being Switzerland’s biggest trading partner any sustained weakness in that region will have a negative impact on the Swiss economy.

‘Unfortunately, one must conclude that the Swiss economy has taken a step back if not two. My big concern is that the domestic economy has lost momentum faster than expected. Given slowing domestic demand, it is even more important for exports to pick up steam, but the conditions aren’t exactly favourable, given the faltering recovery in Europe’ said a senior economist from the Zurich based Wellershoff & Partners Ltd.

With virtually every piece of Eurozone, data being negative over the past few weeks’ concerns are growing that the economic weakness in the Eurozone is starting to have a negative effect on its major trading partners.

The Swiss economy is also coming under pressure from escalating conflicts between Ukraine and Russia as well as the war in the Middle East against the Islamic State. The conflicts are denting confidence and putting strain onto the global economy. Sanctions imposed by
the West on Russia and Russia’s retaliatory sanctions are proving to be particularly harmful to the Eurozone.
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