Swiss Franc Forecasts: GBP/CHF Lower on BoE Doves Repeat 'Slow and Gradual' Stance

November 25, 2014 - Written by James Fuller

STORY LINK Swiss Franc Forecasts: GBP/CHF Lower on BoE Doves Repeat 'Slow and Gradual' Stance

The British Pound to Swiss Franc exchange rate fell after a dovish tone from the Bank of England (BoE) lost some investor sentiment in the British currency.

BoE Governor Mark Carney spoke in parliament and reiterated that any increases in interest rates would be slow and gradual.

Meanwhile, the upcoming Swiss gold referendum is likely to cause the Swiss Franc to fluctuate in coming weeks. November 30th will see citizens vote on the ‘Save Our Swiss Gold’ initiative which could place the Swiss National Bank (SNB) in an interesting position.

The Pound to Swiss Franc exchange rate converts -0.26 per cent lower at 1 GBP is 1.51438 CHF.
The Euro to Swiss Franc conversion rate is 1.20266 EUR/CHF.
The US Dollar to Swiss Franc exchange rate converts -0.32 per cent lower at 1 USD is 0.96408 CHF.
The Canadian Dollar to Swiss Franc exchange rate converts -0.04 per cent lower at 1 CAD is 0.85641 CHF.

The SNB would be forced to hold 20% of its reserves in Swiss gold and would also be unable to sell it. However, the central bank has already stated its preference for holding reserves in currency which allows more fluidity and the added ability of aiding intervention in the forex market. SNB President Thomas Jordan stated: ‘The initiative is dangerous because it would weaken the SNB. It would make it considerably harder for us to intervene with determination in a crisis situation and fulfil our stability mandate.’

So, how likely is it that the initiative will pass? The most recent polls have seen a decline in ‘Yes’ vote favour after a strong start when the initiative was announced. However, polls also show some 15% of voters are undecided, which could still allow for an element of surprise in the actual vote. Analyst James Steel suggests: ‘the impact of a ‘Yes’ vote could quickly translate into prices sand take gold as much as $50 higher. The bulk of opinion in the market appears to favour a ‘no’ vote and although a rejection of the provision by voters would not be a surprise, it could deal a modest psychological blow to the market and help reaffirm the bear trend in prices, but is unlikely to send prices immediately lower.’

However, concern over the Swiss National Bank’s cap on the Swiss Franc to Euro exchange rate is extremely high. The Swiss Franc is hovering closer to its 1.20 cap than it has done for some time.

Pound to swiss Franc Exchange Rate Forecast

Factors that could alter the Pound to Swiss Franc currency pair include Wednesday’s Swiss UBS Consumption Indicator which resided at 1.41 in September. UK Gross Domestic Product (GDP) figures are also out and are expected to reside at 3.0% in the third quarter as they did in the second. UK CBI Reported Sales are also published and the index has been forecast to decline in November from 31 to 28. Swiss Industrial Production will be available on Thursday which could have a moderate effect on the Swiss Franc exchange rate.

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