Hopes for UK Post-Brexit Economic Rebound Trigger GBP/CHF Exchange Rate Rise

January 22, 2018 - Written by Frank Davies

STORY LINK Hopes for UK Post-Brexit Economic Rebound Trigger GBP/CHF Exchange Rate Rise

During the previous week, the Pound rose overall against the Swiss Franc, despite a number of negative UK data releases.

The GBP/CHF exchange rate opened around 1.3295 on Monday, later rising to the region of 1.3350 on Friday evening.

Key UK takeaways were that inflation had slowed in December, while retail sales had been worse than expected during the month.

The only Swiss news to speak of was that import price growth had slowed on the month in December.

GBP/CHF Exchange Rate Climbs after Positive Post-Brexit Forecast

The Pound has advanced against the Swiss Franc along with peers like the US Dollar and Australian Dollar today.

This favourable trading is down to an extremely optimistic UK economic forecast, from former Treasury minister Lord Jim O’Neill.

Mr O’Neill has been looking at the economic development of the UK after Brexit and has largely been positive in his outlook.

Considering the possibility of a UK economic recovery in the post-Brexit period, O’Neill has stated that Brexit damages could soon be repaired, saying;

‘That is because some parts of the [UK], led by the north west, are actually doing way better than people seem to realise or appreciate.

As well as this crucial fact, the rest of the world is also doing way better than many people would have thought a year ago, so it makes it easier for the UK.‘

CHF/GBP Exchange Rate Declines on Overvaluation Concerns

On a quiet start to the week for the Switzerland, the Swiss Franc has fallen against the Pound and made mixed movements against other peers.

The only notable news has concerned a speech from Swiss National Bank Chairman Thomas Jordan, who has stated that the Swiss Franc remains ‘highly valued’.

Jordan has added that higher interest rates is not likely in the near-term, stating;

‘Swiss inflation is still very low, significantly under 2%, actually even under 1%. There is no need to rush things’.

GBP/CHF Forecast: GBP/CHF Turbulence ahead on UK Wage Growth Stats

The week’s next major UK news will come out on Wednesday morning, consisting of national unemployment and earnings data for November.

At the time of writing, no change in either reading was forecast. If earnings growth slows, however, the Pound could decline against the Franc and other currency peers.

The effect of lower inflation would effectively be nullified if wage growth slowed.

On the other hand, however, an unexpected rise in wage growth could trigger a Pound rally as the national wage squeeze would definitively be lessened.

In Switzerland, the rest of the week may be dominated by events at the World Economic Forum (WEF) annual meeting in the Swiss town of Davos.

While the overarching event might not have much effect on the Swiss Franc’s value, takeaways from the four days could still have a strong influence on the Franc as well as the Pound.

Considering what could come out of the event, Guardian Economics Editor Larry Elliott has said;

‘The bulls are not really interested in anything that questions their rosy view of the world: Isn’t it likely that Beijing will slow down the Chinese economy without a crash? Aren’t inflationary pressures so muted that central banks are under no real pressure to raise interest rates rapidly?

Tax cuts are coming. All of which means share prices have only one way to go: up. We have been here before: in 2006 and early 2007’.

Elliott’s foreshadowing reference to the late 2000’s financial crisis may be premature to some, but if WEF attendees don’t appear too concerned about economic instability, the Swiss Franc could dip on worries about marketplace complacency.

Outside of Davos developments, the Swiss Franc could also be affected by any fluctuations in the cost of gold, due to the substantial reserves of the metal in Switzerland.

The price of the commodity has risen since the start of 2018, but if it drops suddenly then the Swiss Franc could fall in value.

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TAGS: Swiss Franc Forecasts