Pound Gains Versus Swiss Franc Exchange Rate (GBP/CHF) as UK Construction Offers a Boost

February 4, 2015 - Written by David Woodsmith

STORY LINK Pound Gains Versus Swiss Franc Exchange Rate (GBP/CHF) as UK Construction Offers a Boost

The Pound advanced against the Swiss Franc in Tuesday’s trading after UK construction data showed an increase in production.

The Construction Purchasing Managers Index was initially expected to fall in January from 57.6 to 57.0; however, growth actually improved to 59.1. Markit economist Tim Moore commented: ‘UK construction companies have found their feet again after a protracted slowdown in output growth at the end of 2014. Stronger trends were recorded across housing, commercial and civil engineering, although each category of activity still experienced much slower growth than the high-water marks achieved last year. In short, the peak speed of the construction recovery seems to be over, but reports of its death have been greatly exaggerated.’

Meanwhile, the Swiss Franc remained lower as a result of speculation that the Swiss National Bank intervened in the forex market. Reports suggest the central bank has been attempting to manage the currency after the recent announcement that the Euro and Franc would no longer share a tie saw the Swiss currency surge. In addition, reports have surfaced that the Swiss National Bank wishes to aim for an unofficial tie between the two currencies. Analysts at Morgan Stanley commented: ‘We believe that the central bank will continue to intervene in the forex markets as it has suggested in previous statements and, according to press reports, the SNB would tolerate losses of up to SFr10bn.’

However, the Swiss Franc was little affected by the narrowing of the Swiss trade surplus in December, which shrank from 3.80B to 1.52B. Exports tumbled in December by -3.1% while imports increased by 0.7%. However, on the year exports grew by 3.5%, destroying the previous record for export growth set in 2008. However, the price of some Swiss goods has risen by around 20% since the Swiss Franc cap was removed. Analyst Sulabh Madhwal commented: ‘Owing to rising production prices, demand from distributors across the world is expected to decline. Japanese and American manufacturers are positioned well to challenge the dominance of Swiss manufacturers.’

Swiss Consumer Confidence will be out during Thursday’s session and could offer the Swiss Franc some opportunity for movement. Economists expect the index to fall in January from -11 to -13. Friday could be another eventful day for Franc trading as the Swiss Retail Sales figure emerges. On the year, November recorded a -1.2% decline in sales and any upbeat number that could pull the ecostat higher could help boost the Franc. UK Trade Balance stats are also out on Friday. The nation’s deficit is expected to widen in December.

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