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Pound Climbs against Swiss Franc (GBP/CHF) as Investors Weigh UK Consumer Prices

April 14, 2015 - Written by Ben Hughes

Pound Softer after Core UK CPI Softens, Non-Core Inflation Holds at 0.0%



The Pound recorded gains against the Swiss Franc after investors weighed up the UK’s latest consumer price reading. Despite core inflation falling from 1.2% to 1.0%, many had expected the non-core measure to dip into disinflation territory as oil prices tumble the world over. However, although the Pound initially stumbled on the news, the exchange rate recovered as investors decided the non-core dip outweighed the unexpected core drop. That being said, many economists believe that a drop into disinflation territory is imminent as the UK battles with weaker crude prices like many other nations globally.

Economist Vicky Redwood stated: ‘The UK just avoided deflation in March, but inflation could yet dip into negative territory at some point in the coming months... The indirect impact of lower energy prices will take a while to come through and so the core rate could drop further in the coming months, tipping the headline rate below zero. Even if the UK does narrowly avoid deflation, inflation is still likely to hover close to zero for most of 2015.’


Effects of Strong Franc (CHF) Still being Felt



Meanwhile, the strong Swiss Franc exchange rate has been playing havoc with many businesses since the Swiss National Bank removed the cap between the Euro and the Franc at the start of the year. Transport giant Kuehne & Nagel International have announced that first quarter profit failed to record gains as the strong Franc damages demand.

Bloomberg reported: ‘Kuehne & Nagel fell the most in three months in Zurich trading after reporting earnings before interest rates and taxes unchanged from a year earlier at 190M Francs. That marked the first time in nine quarters that operating profit didn’t advance. The figure lagged behind the 196.9 million Franc average of seven analyst estimates.’


Thursday’s likely to be an interesting day for the Swiss Franc with the Swiss Producer Price Index figures scheduled for release. March is forecast to come in at 0.0% after February’s -1.4% contraction, while the annual figure is expected to slip further into contraction territory from -3.6% to -3.7%. Any negative ecostat could pressure the Franc exchange rate lower against the Pound.

Meanwhile, Thursday will be an extremely quiet day for UK data lending a lot of the UK currency’s movement to global developments, central bank speculation and any residual data release effects. Friday could heat up for the Pound when eagerly anticipated UK labour market stats emerge.

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