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GBP CHF Exchange Rate Accelerates after UK Inflation Hits 2.3%

March 21, 2017 - Written by James Fuller

The British Pound to Swiss Franc exchange rate slumped on Wednesday afternoon. Investors cooled on the Pound following Tuesday’s rally and demand for traditional ‘safe haven’ currencies like the Franc surged.

As demand for the US Dollar weakened and investors began to grow impatient waiting for fiscal policy news from US President Trump, the ‘Trump rally’ unravelled and investors bought into safe havens, benefitting the Franc as well prices of gold which is often correlated with Franc movement.

[Previously updated 22/03/2017]

The Pound fell back against the Swiss Franc on Wednesday as the boost of confidence from the higher inflation rate faded.

In another worrying sign for UK economic growth the Markit household finance index fell to its lowest level since November 2013, suggesting that consumer confidence and spending is already weakening.

[Previously updated 21/03/2017]

Trader Optimism over BoE Rate Hike Cements GBP CHF Gains

In a higher-than-forecast result, annual UK inflation in February has risen from 1.8% to 2.3%. This news has sparked more than a few hopes that UK interest rates could be raised sooner rather than later.

As well as Bank of England (BoE) Governor Mark Carney himself dismissing this notion, however, BBC Economics Editor Kamal Ahmed added;

‘Inflation is on an upward trajectory and could peak above the BoE’s forecast of 2.7% in the first three months of 2018. But…wage growth is actually slowing. Given that trend, the doveish position of the BoE is likely to remain in place’.

GBP CHF Rate Forecast to Flop if UK Sales Disappoint

With the week’s major UK data release now out of the way, the Pound is next set to be shifted by Thursday’s retail sales stats for February.

These have been forecast to rise on the month and the year, but as February falls outside of the typical seasonal sales month, these estimates may prove inaccurate and could weaken the Pound if they fall unexpectedly.

It is possible that the Pound will soften prematurely at the end of the week due to the next week’s historic event – Theresa May’s activation of Article 50 to take the UK out of the EU.

CHF Remains Tight against GBP after Gold Price Rally

The Franc has fallen by -0.4% against the Pound today but has nonetheless been supported recently by a sharp spike in gold costs.

Since the G20 dropped anti-protectionism agendas over the weekend in response to US pressure, traders have been piling into gold as a safe haven commodity.

This caused a Franc-boosting rise in the price of gold from just over $1200 per 100 ounces to almost $1245 in a matter of days.

CHF GBP Exchange Rate Forecast to Flop if Gold Price Ascent Continues

Given the uncertainties about global trading after the G20 meeting, it is not inconceivable to suppose that gold prices will keep rising over the course of the week, to the Franc’s advantage.

Other Franc influencers will include Wednesday’s Swiss National Bank bulletin, which may raise CHF demand if it upgrades inflation forecasts; the rate has only recently broken out of a sustained period of deflation that started in late 2014.

The week’s other Swiss news will be Friday’s Q4 current account which previously posted a surplus of 20.6bn.
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