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GBP CHF Exchange Rate falls as UK Manufacturing Slows

March 1, 2017 - Written by Toni Johnson

The British Pound to Swiss Franc exchange rate continued to trend near the week’s lowest levels on Thursday afternoon. Sterling’s attempts to recover were limited by solid demand for ‘safe haven’ currencies.

With Federal Reserve interest rate hike bets soaring in the US, investors began to speculate that the world’s biggest economy could see higher interest rates sooner rather than later, which sparked demand for safer investments to protect against market volatility.

[Previously updated 01/03/2017]

The Pound reached a weekly low against the Swiss Franc this morning as Markit revealed that the UK’s manufacturing sector under-performed in February.

Poor Manufacturing PMI Pressures Pound Swiss Franc (GBP CHF)

A recovery in the Pound Swiss Franc (GBP CHF) exchange rates this morning was dealt a heavy blow by the release of the UK’s latest Manufacturing PMI.

Figures released by Markit show that growth in British factories slowed from 55.9 to 54.6 last month with the fall in activity far larger than the 0.3 drop that had been forecast.

The fall was partly attributed to subdued domestic demand as British households seek to tighten their budgets in the face of rapidly rising inflation and anaemic wage growth.

Manufacturers are also facing rising production costs as the weakness of Sterling ahead of Brexit drives up prices for importing materials.

Howard Archer, chief UK and European economist at IHS Markit said;

‘The slowdown in growth in domestic orders in February fuels belief that there are mounting challenges for the manufacturing sector.’

While there were some positives from the data such as an uptick in exports as UK goods become more attractive to foreign markets, the overall doom and gloom of the report left the Pound significantly weaker than it started this morning.

Uptick in Domestic Data Prompts Rise in Swiss Franc

Meanwhile the Swiss Franc was strengthened today by the release of Switzerland’s latest economic data.

After initially falling this morning over concerns that consumer consumption would fall, CHF quickly rallied as markets were proved wrong with the release of the UBS Consumption Indicator.

The survey from the UBS bank reported that Swiss consumers’ economic and financial expectations improved in January, rising from 1.38 to 1.48 as rising employment led to a more optimistic outlook for the coming months.

The Franc was also bolstered by Switzerland’s own Manufacturing PMI as in contrast to the UK’s slowdown, Swiss factories saw explosive growth in February.

Data compiled by SVME showed that activity skyrocketed from 54.6 to 57.8 last month, easily outpacing predictions it would rise to 55.6 and rising at its fastest pace since April 2011.

GBP CHF Exchange Rate Forecast: Swiss GDP Ahead

The GBP CHF exchange rate is likely to fall even further on Thursday as economists forecast that Switzerland’s GDP report will show that its economy grew 0.5% at the end of 2016.

The jump will be welcomed by investors after the Swiss economy failed to show any signs of growth in the third quarter.

Meanwhile tomorrow will also see the release of the UK’s latest Construction PMI, while currently predicted to hold steady at 52.2 should it perform as poorly as the British manufacturing sector did in February it is likely that the Pound could weaken further.

Current Interbank Exchange Rates

At the time of writing the GBP CHF exchange rate was trending around 1.24 and the CHF GBP exchange rate was trending around 0.80.
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