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Pound Swiss Franc (GBP/CHF) Exchange Rate Climbs as Brussels and Downing Street Agree on Brexit Transition Proposal

March 20, 2018 - Written by Toni Johnson

Brexit Transition Fundamentals Agreed – Sterling (GBP) Exchange Rates Climb

The Pound to Swiss Franc (GBP/CHF) exchange rate extended its climb on Tuesday, supported by Monday’s news that Downing Street and Brussels have agreed on the fundamental elements of a 2-year Brexit transition period for the UK.

Following a series of intensive talks over the weekend UK Brexit Secretary David Davis and EU Chief Negotiator Michel Barnier have agreed on a large number of variables that had previously been slowing transition talks, this included the rights of UK citizens in the EU and vice-versa, as well as the UK’s ability to negotiate trade deals with other nations during the proposed transition period.

The transition period, just under 2-years long, is expected to end on the 31st of December 2020.

However, UK Prime Minister Theresa May has faced protests over the fact that a deal on the Irish border has not yet been reached, and the fact that Northern Ireland could be kept under EU law during the transition through a ‘back stop’ plan.

This did not massively negate Sterling’s lead against the Swiss Franc, however, with markets pleased that clarity had finally been given to British businesses.

Swiss SECO Upwardly Revises its Growth and Inflation Forecasts – GBP/CHF Remains Resolute

News for the Swiss Franc (CHF) was upbeat today, with the Swiss State Secretariat for Economic Affairs (SECO) posting a report today that painted a brighter picture for the Swiss economy.

SECO notably revised their growth and inflation forecasts higher, with the 2018 GDP forecast pushed up to 2.4%, and 2019’s GDP up to 2.0%.

Meanwhile the inflation estimate for 2018 was upped to 0.6%, whilst 2019’s was pushed to 0.7%.

The report cited optimism within the buoyant international economy as the primary drivers behind the decision, reading:

‘[SECO expects] the economy to continue its dynamic recovery and anticipates strong GDP growth of 2.4% in 2018. The buoyant international economy is supporting foreign trade, while a favourable investment climate is stimulating domestic demand’.
In other news, Switzerland’s trade surplus expanded in February, widening to CHF 3.2bn from the previous period’s CHF 1.1bn in January.

This was driven by a notable rise in exports and a drop in imports.

Ultimately, however, the positive data readings were unable to knock GBP/CHF out of Sterling’s favour.

Pound Swiss Franc (GBP/CHF) Exchange Rate Forecast: UK Labour Market Readings in the Spotlight

The Pound Swiss Franc (GBP/CHF) Exchange Rate could come under pressure tomorrow as markets respond to the UK’s highly anticipated wage growth and unemployment figures.

Markets grew slightly concerned on Tuesday on the release of the UK’s February inflation readings, with the year-on-year print easing to 2.7%, down from the previous period’s 3.0% and the forecast of 2.8%.

This fall could potentially diminish the chances that the Bank of England (BoE) will move hawkishly in May, though markets will be waiting for tomorrow’s labour market figures for a better insight into the UK economy.

If unemployment remains at record-low levels and wage growth picks up, then GBP/CHF could trade higher.

Conversely, disappointing results could provoke caution from the central bank, potentially putting fresh pressure on the Pound.
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