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Pound Sterling to Swiss Franc (GBP CHF) Relatively Static - KOF Forecast May Encourage Gains

October 28, 2014 - Written by Ben Hughes

The British Pound to Swiss Franc (GBP CHF) exchange rate trended in a narrow range on Tuesday, however has seen positive moves as the week has continued.



gbp chf forecastSterling softened versus other majors after the Bank of England gave further mixed signals on the topic of interest rate hikes.

The Pound has long been extremely sensitive to remarks made on the highly anticipated prospect of borrowing cost increases.

BoE Governor Mark Carney even gained the title of an ‘unreliable boyfriend’ after issuing conflicting comments regarding the subject and causing the Pound to yoyo.

Two Monetary Policy Committee (MPC) hawks, Ian McCafferty and Martin Weale, have warned that price pressures will occur soon if the benchmark interest rate remains at 0.50% for much longer.

Furthermore, McCafferty has argued that leftover capacity in the UK economy is being used up at a swift pace.

The Pound to Swiss Franc exchange rate is -0.17 pct lower with a conversion rate of 1 GBP equals 1.52786 CHF.
The Euro to Swiss Franc exchange rate is +0.02 pct higher with a conversion rate of 1 EUR equals 1.20602 CHF.
The US Dollar to Swiss Franc exchange rate today is converting -0.24 per cent lower at 0.94689 USD/CHF.

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Bank of England Rate Hike Prospects Push Sterling lower



However, Monday saw BoE dove Minouche Shafik counteract the McCafferty argument and suggest that there is ‘no significant evidence’ that price pressures are mounting. Shafik instead argued that the UK labour market still has a significant amount of leftover slack to tighten before the bank could make any adjustments to the benchmark rate. Shafik commented: ‘We would need to see more of the data pointing in the same direction in terms of price pressures – particularly in terms of wages and unit labour costs [before interest rates would increase]. In terms of sustained domestic inflationary pressures, that’s going to be the ultimate test.’

The last three MPC meetings have seen a divergence of 2:7 in favour of rate hikes and speculation as to whether the BoE will hike rates before Christmas remains.

UBS Misses Targets as Legal Debate Continues



Meanwhile, Switzerland’s biggest bank, UBS, have failed to reach profit forecasts after allocating £1.2 billion for potential legal provisions. The bank is presently under investigation for suspected currency rigging and is attempting to both quell the allegations and come to an agreement with authorities. Barclays in the UK is also under investigation for the same illegal activity. UBS Chief Executive Sergio Ermotti commented: ‘We are actively addressing litigation and regulatory matters.’ However, this isn’t the first time UBS has come under fire for illicit activity. The Swiss Bank has paid a whopping $3.6 billion in penalties since 2012 for activities such as encouraging clients to evade tax.

Switzerland recently cut its growth forecasts on account of the Eurozone’s flat lining economy. The Swiss government asserted that even Switzerland wasn’t immune to the ‘fragile and vulnerable Eurozone.’ Germany’s recent downturn has proved detrimental to Switzerland as the Eurozone is the Nordic nation’s largest trading partner. However, any improvement in the Eurozone could see Swiss growth pick-up pace once again.

Amid a quiet data week, the Pound to Swiss Franc exchange rate is likely to see some movement from the Swiss KOF Institute Autumn Economic Forecast, released on Wednesday. An optimistic report could encourage the Swiss Franc to advance higher against Sterling; however, in light of recent growth cuts any downbeat comments could pressure the ‘Swissie’ lower.

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