Pound to Swiss Franc Exchange Rate in Narrow Range After Swiss and UK Data, UBS Warns Strong Franc could Impact Profits

Modified: Tuesday, 10 February 2015 22:37 BST - Written by Tim Boyer

STORY LINK Pound to Swiss Franc Exchange Rate in Narrow Range After Swiss and UK Data, UBS Warns Strong Franc could Impact Profits

The Pound remained in a tight range against the Swiss Franc on Monday after both Swiss and UK data emerged. The seasonally adjusted Swiss Unemployment Rate fell from 3.2% to 3.1% in January—a favourable development for the nation. However, the Swiss Consumer Price Index also softened from -0.3% to -0.5%. Economists had expected a larger drop to -0.6%. Analyst Ipek Ozkardeskaya commented: ‘The price deceleration is now ready to stay in Swiss headlines for months ahead.’

Meanwhile, Switzerland’s largest bank UBS has suggested that although it’s doubled its full-year dividend, the Swiss Franc’s appreciation since the Swiss National Bank dropped the cap against the Euro, could damage future profits. UBS chief executive Sergio Ermotti commented: ‘The increased value of the Swiss Franc relative to other currencies, especially the US Dollar and the Euro, and negative interest rates in the Eurozone and Switzerland will put pressure on our profitability and, if they persist, on some of our targeted performance levels.’ Ermotti also suggested that the central bank was unlikely to pressure interest rates lower as they already reside in the negatives.

The UK released Industrial Production and Manufacturing Production stats on Tuesday which showed a decline in both sectors. UK manufacturing fell from 3.0% to 2.4% in December on the year after economists had estimated a greater decline to 2.0%. In addition, the industrial area’s performance fell in line with expectations at 0.5% from 1.1%. Analysts have suggested the decline in both areas is a result of increased nervousness regarding Eurozone health. In addition, maintenance of North Sea oil rigs took much longer than initially expected and therefore caused a decline in productivity.

Economist Rob Wood stated: ‘December’s overall industrial production fall was driven by falls in volatile oil and utilities output. Extended maintenance in some North Sea fields, like Huntington, account for the 1.4% [month-on-month] fall in extraction output in December – as an aside, that fall in oil output in December tallies with last week’s trade figures showing the oil trade deficit worsening in December.’

However, Tuesday’s Pound movement isn’t over yet with the publication of UK NIESR Gross Domestic Product Estimates ahead. The January figure could boost the Pound if favourable; the December ecostat resided at 0.6%. The UK House Price Balance will follow on Thursday but is likely to be of small influence for the Pound. Swiss Producer and Import Price figures will be out on Friday and could have a slight impact on Franc trading.

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