Pound Swiss Franc. GBP/CHF Rate Falls as Global Risk Appetite Plummets

March 11, 2011 - Written by John Cameron

STORY LINK Pound Swiss Franc. GBP/CHF Rate Falls as Global Risk Appetite Plummets

The Pound Swiss Franc exchange rate (GBP/CHF) is 1.4993

The second half of this week has seen a major dip in global risk sentiment as a combination of events across the globe caused concern for investors. Political unrest in Libya looks to be escalating into civil war, with Gaddafi’s forces launching an air strike on a rebel-held oil installation, while trade figures released in China yesterday showed a dramatic contraction in domestic imports as well as Chinese exports, putting the strength of the worldwide economic recovery in doubt. Meanwhile, Eurozone sovereign debts continue to provide potential for major instability in the single economic area, with Moody’s downgrading both Greece’s and Spain’s debt this week.

Perhaps most worryingly of all, yesterday reports from Qatif, an eastern city in Saudi Arabia, suggested that Saudi security forces had fired into a crowd of pro-democracy protestors. Further protests are planned to take place across Saudi Arabia after today’s Friday Prayers, as the Shia minority seek the release of prisoners who they say that the Saudi government is holding without charge. Saudi Arabia produces more crude oil than any other country in the world, so political unrest in the notoriously authoritarian state would cause turmoil in the markets.

All of these events have elicited a flight to safety out of equities and other risk-laden investments and into traditional safe-haven assets. The Swiss Franc has been one of the major beneficiaries; the GBP/CHF rate came close to touching 1.5200 as recently as last Friday, but the intervening flight to safety saw it trade as low as 1.4934 yesterday. With this week’s Swiss employment and inflation data showing that fundamentals are strengthening, the strong support of 1.4401, which was December’s multi-year low, looks in sight.

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