Sterling Forecast - Pound to Swiss Franc Exchange Rate Weakens Ahead of BoE Minutes

June 17, 2014 - Written by Frank Davies

STORY LINK Sterling Forecast - Pound to Swiss Franc Exchange Rate Weakens Ahead of BoE Minutes

Pound Sterling forecast The British Pound exchange rate (GBP) was little moved against the Swiss Franc (CHF) as forecasters settled into a waiting pattern ahead of the release of the latest monetary policy meeting minutes from the Bank of England. Investors are widely expecting the minutes to add further support to expectations that the BoE will raise interest rates before the end of the month.

The latest forex markets snapshot as of 18th June 2014 looks like this:
- The Pound to Swiss Franc exchange rate is valued 0.26pct lower at 1.52119 GBP/CHF.
- The Swiss Franc to Euro exchange rate is trading 0.02 per cent lower at 0.82067 CHF/EUR.
- The Swiss Franc to Pound exchange rate is trading 0.26pct up at 0.65738 CHF/GBP.

The British Pound eased against the Swiss Franc on Tuesday morning following the release of weaker than expected UK inflation data and as concerns over the conflict in Iraq continued to offer support to safe havens. The Swiss currency had been finding support against a number of major peers and had been trading at a four month against the Euro as demand for safe haven assets increased as investors grew spooked by the violence occurring in Iraq.

The Franc was finding support as news broke that Iraqi government forces were engaged in heavy fighting with Sunni militants just 30 miles from the capital city of Baghdad. In a further escalation the US said that it was deploying 275 military personnel to the country to protect embassy staff.

In Vienna, US officials held brief discussions about Iraq with their Iranian counterparts at a meeting about Tehran's nuclear programme. American officials have been quick to dismiss reports of military collaboration with a regional rival.

Earlier in the week the Pound managed to press higher against the Swiss Franc as it continued to find support from comments made by the Bank of England’s Governor and deputy governor which hinted that UK interest rates could rise before the end of the year.

Today however the UK currency was softened after data showed that inflation in the country fell to its lowest rate in 4 ½ years last month. The cause for the decline was a fall in food and transport costs.

Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a seasonally adjusted rate of 1.6% last month, down from 2.0% in April. Analysts had expected core prices to slow to 1.7% in May.

The Office for National Statistics said that the fall in food prices was a result of the first year-on-year fall in food prices since 2006. Clothing prices and air fares also fell. The fall in food prices was thought to be as a result of a pricing war between the UK’s major supermarkets.

BoE's weaker than forecast data, Pound Sterling exchange rate cools

The softer than forecast data reduced expectations for a rate hike as it gives the Bank of England a bit more breathing space regarding an interest rate rise decision.

“Given the spare capacity in the economy and the prolonged squeeze on consumers’ purchasing power, the pricing power of retailers, manufacturers and services companies will likely remain limited for some time to come,” said Howard Archer an economist at IHS Global Insight.

According to the Swiss Federal Statistical Office, producer price inflation in the alpine country increased by a seasonally adjusted figure of 0.1% in May, matching economist forecasts. Swiss PPI dropped by 0.3% in April. Year-over-year, the producer price index fell at an annualized rate of 0.8% last month, in line with analyst expectations, after dropping 1.2% in April.

The next major piece of economic data due for the Swiss Franc is the release of the Swiss Central Bank’s latest interest rate decision. Rates are expected to remain unchanged at 0%.

Latest Swiss Franc & Pound Exchange Rates, updated 18th June 2014

The Pound Sterling to Swiss Franc exchange rate is trading down -0.26% at 1.52119 GBP/CHF.
The Euro to Swiss Franc exchange rate is trading up +0.01% at 1.21851 EUR/CHF.
The US Dollar to Swiss Franc exchange rate is trading down -0.13% at 0.89807 USD/CHF.

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