Pound to Swiss Franc: GBP/CHF Exchange Rate Falls after UK Domestic Data Dents Investor Sentiment

May 19, 2015 - Written by Toni Johnson

STORY LINK Pound to Swiss Franc: GBP/CHF Exchange Rate Falls after UK Domestic Data Dents Investor Sentiment

UK Inflation Data Drives Sterling Lower

The Pound softened against the Franc after unfavourable UK domestic data emerged. The UK’s Consumer Price Index recorded a decline of -0.1% in April, rather than remaining flat at 0.0% as economists had expected.

Bank of England Governor Mark Carney commented on the matter, saying: ‘We expect inflation to be very low for several months. But over the course of the year, towards the end, inflation should start to pick up towards our 2% target. Our job is to ensure that inflation remains low, stable and predictable. The British people should enjoy this period of very low energy prices, very low food prices... enjoy it while it lasts. We’re going to bring inflation back to that 2% target to keep this economy well functioning, to keep the jobs market growing and to bring income growth up.’

Eurozone Developments Boost Safe-Haven Assets

Meanwhile, the Swiss Franc is having an interesting week as problems in the Eurozone stoke safe-haven demand. Looking back to the start of the year, the Swiss National Bank made a shock move by removing the tie between the Euro and the Franc. However, since then the Swiss currency has been trading higher, no longer bogged down by the Euro’s movement or the Eurozone’s economic fatigue.

Strategist Niels Christensen commented: ‘[The Franc is getting] back to normal, rising when the risk aversion is high and falling when it is low.'

But it appears that the situation in Greece could heat up rapidly in the next few weeks with government officials claiming that they need to reach a deal by June 5th or the nation will have run out of money. Investors appear to think that the possibility of a Greek default could be rising; moreover, so will the Franc.

Strategist Lee Hardman stated: ‘The Franc is still seen as one of the safe-haven currencies of choice, despite the SNB. The traditional role of the Franc benefiting when concerns of a Greek default rise.’

Swiss Retail Sales Fall

Meanwhile, Swiss Retail Sales fell further in March on the year, from 2.7% to 2.8%. The loss was the biggest recorded in nearly 13 years and hints that deflation is shrouding the nation. SNB officials are expected to speak in Geneva later in Tuesday’s session which could cause some additional Franc exchange rate movement. Furthermore, Wednesday will see the BoE release its latest meeting minutes which could also impact the market.

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