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Pound Sterling to Swiss Franc Exchange Rate (GBP/CHF) Continues to Lower on UK Inflation Data

September 16, 2014 - Written by Toni Johnson

The UK Pound to Swiss Franc exchange rate softened, as Sterling did against all of its most traded peers on Tuesday as investors turned to safer assets ahead of Thursday’s Scottish Referendum vote and as economic data showed that inflation eased last month.

The markets are jittery ahead of Thursday’s historical Scottish referendum, the outcome of which is too close to call. Earlier in the week, the Pound regained some ground after a number of polls suggested that the no to independence campaign would emerge the victor. However, with tensions rising ahead of the vote the actual outcome will be anyone’s guess.

Data released earlier in the session put pressure upon the Pound. The latest inflation report published by the Office for National Statistics (ONS) showed that UK inflation slowed in August to come close to matching its lowest level in five years. The cause for the drop was thought to be because of an ongoing price war between the nation’s leading supermarket chains.

According to the ONS, the rate of consumer price inflation in the UK fell from July’s reading of 1.6% to 1.5% last month. Food and non-alcoholic beverage prices declined by an annual rate of 1.1% the biggest decline seen since 2003.

The data means that the nation’s inflation rate is still below the Bank of England’s target of 2% and is likely to remain below that target level until the middle of next year. The report also reduces the pressure on the BoE to raise interest rates.

‘We suspect that low inflation, current very weak earnings growth, and the increased downside risks to economic activity coming from heightened geopolitical tensions and stuttering Eurozone economic activity will cause the Bank of England to hold off from acting until February at the earliest. Even though current ongoing robust economic activity and markedly falling unemployment provides support to the case for a near-term interest rate hike,’ said Howard Archer from IHS Global Insights.

The Swiss Franc meanwhile was benefitting from increased demand for safe haven assets as concerns over Ukraine and the widening conflict against the Islamic State caused concerns. With a lack of domestic market, moving data the Swiss Franc looks set to experience moment because of events and data releases from elsewhere.

The Franc also advanced against the Euro after the release of worse than forecast economic sentiment data out of the Eurozone and Germany.

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As the Scottish vote draws nearer the Swiss Franc is forecast to continue to trade firmer against Sterling.

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