Pound Sterling to Swiss Franc Exchange Rate (GBP/CHF) Lower as Sanctions Weigh

Modified: Tuesday, 5 August 2014 16:43 BST - Written by Frank Davies

STORY LINK Pound Sterling to Swiss Franc Exchange Rate (GBP/CHF) Lower as Sanctions Weigh

The Pound to swiss Franc exchange rate (GBP/CHF) advanced to a four-day high on Tuesday after concerns over the potential economic impacts on the Alpine nation after it imposed fresh sanctions upon Russia.

Switzerland extended its sanctions against Russia over the Ukraine crisis and in an attempt to prevent Russian businesses using the historically neutral country as a way to circumvent sanctions introduced by the European Union and United States.

The new sanctions mirror those imposed by the EU at come into effect this evening. The individuals and businesses listed in the sanctions are now banned from travelling and transferring any assets from outside the EU into Switzerland.

The Franc was also under pressure after data out of the Eurozone disappointed economists and raised speculation that the European Central Bank will introduce new monetary easing measures in order to tackle the threat of deflation taking root in the 18-member currency bloc.

Markit’s Purchasing Managers Index (PMI) for the Eurozone’s service industry showed an expansion in activity but one that was below economist forecasts. Even a positive retail sales report was not enough to give the single currency support.

Service sector activity in German and Spain grew last month, while the expansion in the French service sector remained marginal.

The Euro area's services PMI came in at 54.2, up from 52.2 in June, but slowing slightly from a preliminary reading of 54.4.

The Swiss Franc was under pressure despite data released on Monday, which showed that Swiss manufacturing activity increased to its best level in three-months. The PMI advanced to 54.3, higher than the market expected figure of 53.1.


Amid no major economic releases from Switzerland going forward in the week save for Wednesday’s inflation data, all eyes will now be set on the release of the Swiss unemployment rate, due on Friday.

Against the Pound, the Franc declined again after the UK currency was supported by the publication of data, which showed that the UK’s service sector expanded at a faster pace in July to exceed analyst expectations.

According to Markit Economics, its PMI report advanced to a reading of 59.1 in July, a rise from the previous month’s figure of 57.7. Economists had been expecting a reading of 58. As with all PMI data, a number above 50 marks expansion whilst one below connotes contraction.

“The vast services economy’s growth surge shows no sign of abating. The July PMI showed the sector expanding at the fastest rate since last November, as demand for services continued to increase at a rate rarely seen in the survey’s 18-year history. The buoyancy of the services and construction sector PMIs suggest the domestic economy clearly continued to boom in July, offsetting the cooling of growth seen in the manufacturing sector”, said Markit’s chief economist.

As a result, the Pound advanced further against the single currency. The GBP/EUR exchange rate advanced above the 1.26 level.

“We had a good jump in the price action immediately on the data. We’ve got quite a decent move in Euro-Sterling, somewhat two-pronged because I think the market appetite is still to sell the Euro as well,” said a hedge fund trader from Mizuho Bank.

Against the US Dollar the Swiss Franc fell to a seven-month low as the ‘Greenback’ remained supported after regaining strength following last week’s disappointing jobs data. The USD/CHF exchange rate is expected to remain weak until the end of the week.

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