Pound Sterling to Swiss Franc (GBP/CHF) Falls, Despite Lack of Swiss Data and Upbeat UK Ecostats

May 12, 2015 - Written by Ben Hughes

STORY LINK Pound Sterling to Swiss Franc (GBP/CHF) Falls, Despite Lack of Swiss Data and Upbeat UK Ecostats

Franc Reacts to Global Economic News

With a serious lack of Swiss domestic data coming to light this week, the Franc is going to be sensitive to global developments. Tuesday saw the Pound fall against the Swiss Franc despite upbeat UK economic ecostats. The UK’s Industrial Production figure rose by 0.7% in March on the year, rather than remaining flat at 0.1% as expected.

Economist Howard Archer commented: ‘Now that the general election is out of the way and the political uncertainty is less of a factor, the prospects for manufacturers seem pretty healthy on the domestic demand front, especially for consumer goods. Meanwhile, the underlying fundamentals for business investment still seem decent overall, which hopefully support demand for capital goods, especially now that the risk of political uncertainty and instability has essentially disappeared for the time being following the Conservatives gaining of a majority in the general election.’

UK EU Referendum Could Impact GBP/CHF Exchange Rate

However, it’s fair to say that the political disturbance to the market is not quite over as the economy undergoes some changes by the government. The possibility of a referendum in the UK to determine whether the nation remains in the EU is another event that could cause major market swings and see the Pound exchange rate soften significantly. Furthermore, speculation has heightened that Prime Minister David Cameron may bring forward the vote from 2017 to 2016—a move designed to eliminate clashes with French and German election dates.

Meanwhile, the Swiss economy appears to be faring relatively well since the Swiss National Bank removed the cap between the Euro and Franc exchange rate. Initially, the move shocked markets and economists had forecast a major economic effect, as well as the collapse of many businesses. However, reports of economic growth are coming in, suggesting that stronger expansion figures could see the Franc exchange rate climb higher.

Economist Karsten Junius commented: ‘Besides the obvious shock to exports, consumption and investment that has hit the economy, households and industry seem to be flexible enough to weather the storm.’

However, there are concerns that the strong Swiss currency is damaging tourism in the nation and hotels are suffering as a result. March recorded a decline of 14.5% of hotel stays on the year, with notable falls in holidaymakers from the Eurozone after the Swiss Franc appreciation. However, there was an increase in British, American and Asian hotel-goers. Friday will see the release of Swiss Producer and Import Price data.

The GBP/CHF exchange rate is trading in the region of 1.4516

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