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Pound Sterling (GBP) to Swiss Franc (CHF) Slips as Swiss-EU Relations Improve

December 23, 2016 - Written by Ben Hughes

The Pound to Swiss Franc exchange rate slipped to its worst levels since November on Friday as Brexit concerns continued to weigh on Sterling appeal despite the day’s decent UK growth results.

GBP/CHF fell from the week’s opening level of 1.2818 to a monthly low of 1.2562.

Pound (GBP) Fails to Benefit from Friday’s UK Growth Results

Despite not meeting preliminary figures, Friday’s final Q3 UK Gross Domestic Product (GDP) results failed to inspire any shifts in Sterling movement as the week drew to an end.

This is because the results were mixed. Yearly growth was expected to come in at 2.3%, but instead printed at 2.2%. Quarter-on-quarter growth, on the other hand, beat projections of 0.5% to grow at 0.6%.

As trade quietened towards the long holiday weekend and UK data didn’t make an impression, the main underlying pattern under GBP trade continued to be the week’s concerns that the UK could completely lose single-market access following the Brexit process.

Swiss Franc (CHF) Bolstered by Improved Swiss-EU Relations

Various factors improved the Swiss Franc outlook this week. As the US Dollar was sold from its best levels but markets still found risky currencies unappealing, they instead moved into other traditional ‘safe haven’ currencies like the Swiss Franc.

This allowed the Franc to more easily push GBP/CHF down to a monthly low, though the Franc was also given a boost by Thursday’s news of a new Swiss immigration law.

Switzerland passed a new immigration law but did not impose quotas as many investors feared. As a result, Switzerland’s own membership of the EU single market was no longer perceived to be under threat and demand for the Franc improved.

GBP/CHF Forecast: Light Data Week Ahead for UK and Switzerland

As 2016 draws to an end and many major economies observe the festive winter period, light movement is to be expected in the foreign exchange market.

In particular, UK and Swiss markets are both closed on Monday while UK markets will remain closed on Tuesday to observe the Boxing Day bank holiday. The nations’ economic calendars will also be sparse in the coming week.

Wednesday will see the publication of Switzerland’s November consumption indicator results which may influence some movement in the Franc and Britain’s November BBA house loans figures may cause a little movement in the Pound.

However, ultimately GBP/CHF is more likely to react based on the market’s appetite for risk in the coming week, as well as any ongoing Brexit concerns or developments.

If new comments from the UK or EU give traders more ideas of how the Brexit could turn out, this would likely be the primary factor behind GBP movement.

As for the Franc, it could weaken if traders rush back into the US Dollar on 2017 Federal Reserve bets or if markets opt for a risk-on rally before the year comes to an end.
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