Pound Climbs against Swiss Franc (GBP/CHF) as Investors Remain Upbeat about UK Economic Recovery

April 8, 2015 - Written by Ben Hughes

STORY LINK Pound Climbs against Swiss Franc (GBP/CHF) as Investors Remain Upbeat about UK Economic Recovery

UK Economic Recovery Supports Pound

The Pound recorded gains against the Swiss Franc after both upbeat UK and Swiss data emerged. The Swiss Consumer Price Index was expected to decline from -0.8% to -1.1% in March on the year, but the ecostat surprised by only softening to -0.9%. On the month, March recorded 0.3% growth rather than the 0.1% expectation after February’s -0.3%. The fall in consumer prices is expected to be a result of the Franc’s surge which has resulted in a lower cost of imports. Industry expert Ursina Kubli commented:

‘It’s clear, after the Franc shock, inflation will be in negative turf for some time.’

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The Swiss National Bank removed the cap between the Euro and Franc in January, which caused a massive Franc rally. However, shortly after, the SNB made the decision to cut interest rates further into the negative (to -0.75%) and has since remained relatively determined to leave monetary policy unchanged.

SNB Chief Thomas Jordan stated:

‘ ‘We have now to see what is the impact and for the time being this is the right level. In the very short term, we have to accept that inflation is now below zero, negative, but that will change.’

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However, it wouldn’t be a complete surprise if the central bank unleashed another bombshell when it came to monetary policy after the central bank’s cap removal shocked markets completely. Meanwhile, the Pound could experience movement on account of the Bank of England’s latest interest rate announcement. The central bank is unlikely to change interest rates for some time on account of several factors, including low global inflation as well as the upcoming UK general election. It’s thought that the election will see some massive Pound movement as markets dislike uncertainty and the election has the potential to see a major political shakeup occur. All bets are off for the fate of UK politics and debate between parties is heating up rather dramatically.

British Pound Steady Ahead of BoE Rate Decision

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Meanwhile, UK data appears to be strengthening, which gives hope to hawkish investors that rate hikes could occur in the near future. However, the central bank is also unlikely to make any sudden movements as Greece is still in talks with creditors over its austerity deal. This week, the BoE warned banks that ongoing and prolonged negotiations as well as the possibility of a ‘Grexit’ could become harmful for UK banks and urged that institutions prepare contingency plans for both possible events.

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