Foreign Exchange Insight : Outlook For Swiss Franc is Bright as GBP/CHF Rate Improves and USD/CHF Rate Drops

March 2, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Insight : Outlook For Swiss Franc is Bright as GBP/CHF Rate Improves and USD/CHF Rate Drops

Political unrest in Libya is threatening to escalate into civil war as pro-Gaddafi forces move into rebel territory to capture an oil installation in the eastern city of Brega. Government jets have also carried out air strikes against rebel weapons dumps.

Continued unrest has seen a return of risk aversion to the markets with the broad-ranging S&P 500 losing over 1.5% of its value during yesterday’s session, whilst in London the FTSE 100 is currently trading down by almost 0.5% on the day so far.

The spike in risk aversion looks to be providing support for the Swiss Franc ahead of the traditional beneficiary of flights-to-safety, the US Dollar, with the Franc currently up by a third of a percentage point on the day against the Greenback today. The Franc traded down to 0.9234 against the USD on 24th February, which represented a multi-year high. A close below this level today would signify a significant break and there would be little technical resistance stopping the Swiss currency making further gains. The GBP/CHF rate currently stands at just above 1.5100, 3c above the near-term low.

Swiss fundamentals are looking strong, with yesterday’s GDP figure for quarter 4 providing further support for the Franc. Analysts had expected the figure to come out at 0.5% and were pleasantly surprised when it came out at 0.9%. With Swiss unemployment remaining low and the Franc poised to pick up safe-haven support from any further Eurozone debt crises, the Swiss Currency looks to be in a strong position.

Tomorrow morning sees the release of Swiss Retail Sales figures for January, which could provide further support for the Franc. In the absence of any other significant Swiss data during the rest of the week, movements in global equities markets will continue to provide direction for the Franc.

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TAGS: American Dollar Forecasts Pound Swiss Franc Forecasts Swiss Franc Forecasts