GBP/CHF Falls as Franc Enjoys Support from ongoing Greek Negotiation Jitters

May 26, 2015 - Written by Ben Hughes

STORY LINK GBP/CHF Falls as Franc Enjoys Support from ongoing Greek Negotiation Jitters

Safe Haven Demand Sees GBP/CHF Falter

In a quiet day for European data, the Pound softened against its Swiss Franc counterpart as investors favoured safe-haven assets. The Franc has been pegged by many analysts to gain the most from the unfolding situation between Greece and its creditors with the Euro already dropping to a three-week low against it. There’s increasing fears that the nation may not be able to make its next International Monetary Fund payment which is due on the 5th June. If Greece were to default on its debts, a Grexit could soon occur.

Strategist Jane Foley commented: ‘When stresses get worse, the Swiss Franc does seem to get inflows and that appears to be the case in recent weeks. While Greece has been close to the headlines all of this time, the deadlines coming up now are real make or break deadlines.’

There seems to be little progress being made in Greek negotiations at the minute with blame being passed back and forth as to whose fault it is that a deal hasn’t yet been made.

Greek Finance Minister Yanis Varoufakis wrote: ‘The problem is simple: Greece’s creditors insist on even greater austerity for this year and beyond – an approach that would impede recovery, obstruct growth, worsen the debt-deflationary cycle, and, in the end, erode Greeks’ willingness and ability to see through the reform agenda that the country so desperately needs.’

Grexit Fears to Continue Supporting Franc

The situation may escalate between now and the June 5th deadline, which could allow the Franc to climb significantly as investors price in the likelihood of the currency bloc losing a member. Meanwhile, the Franc could also fluctuate on domestic data this week such as Wednesday’s UBS Consumption Indicator. If the April figure can improve upon March’s 1.35, the Franc exchange rate could climb. Thursday will be another influential day for movement with the Swiss Trade Balance released. Imports and exports data will also be uncovered which could help to support the Franc if favourable. Meanwhile, the UK’s main event will be Thursday’s Gross Domestic Product stat. If UK growth can reach 2.5% on the year as expected, the Pound may also be offered some support. Additionally, debate on the UK’s EU referendum could influence the market as major companies weigh in on the possibility of the UK leaving the union. Political changes can influence the market significantly and this is likely to be an ongoing topic of debate.

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TAGS: Pound Swiss Franc Forecasts