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Pound Swiss Franc (GBP/CHF) Exchange Rate Rises as Swiss-EU Tensions Rise

July 1, 2019 - Written by John Cameron

GBP/CHF Exchange Rate Edges Higher as Swiss Retail Figures Fall

The Pound Swiss Franc (GBP/CHF) exchange rate edged higher by 0.4% today and is currently trading around 1.6592Fr on the interbank market.

The Swiss Franc (CHF) fell against the Pound (GBP) following the printing of the yearly Swiss real retail sales figures for May, which fell below the consensus -0.4% to -1.7% – their largest fall in 8 months.

In political news, Switzerland and the European Union’s partnership came under increasing strains as of Sunday night, with the EU ceasing to recognise Swiss stock exchange regulations as equivalent to its own.

Charlotte de Montpellier, a Switzerland Economist for the financial services company ING, commented:

‘Tensions between Switzerland and the EU aren't good for trade, business investment, or for the funding of scientific research in Switzerland that depends on European funds… All in all, beyond the purely political aspect of the negotiations, a deterioration of relations between Switzerland and the EU risk jeopardising the health of the Swiss economy.’

The temporary US-China ‘trade truce’ has also amplified risk-appetite, with traders flocking from the safe-haven of the Swiss Franc to riskier assets.

GBP/CHF Exchange Rate Improves despite Poor UK Manufacturing Figures

The Pound, meanwhile, managed to maintain its gains against the Swiss Franc despite poor UK manufacturing figures for June, which fell deeper into contraction from 49.4 to 48.0.

Rob Dobson, a Director at IHS Markit, commented:

‘The downturn in UK manufacturing deepened during June, as the impact of firms unwinding stockpiles built before the original Brexit date continued to reverberate through the sector and exacerbate weak demand. This led to solid decreases in both production and new orders, which sank the headline PMI to its lowest in almost six-and-a-half years.’

Sterling traders have, however, become increasingly jittery following comments from Foreign Secretary and Tory leadership race candidate Jeremy Hunt to the effect that a no-deal Brexit still remained on the table.

Mr Hunt said:

‘I urge any colleagues thinking of blocking a no deal Brexit to reflect that you may in fact be making it harder to get a negotiated exit, by giving the EU misplaced confidence that we will give ground, and ultimately increasing the chance that we leave without one.’

GBP/CHF Forecast: Swiss Franc Could Fall Further on Heightened Risk Appetite

Pound traders will be looking ahead to a speech by Mark Carney, the Governor of the Bank of England, tomorrow.

Any dovish comments about the UK economy should see the GBP/CHF exchange rate begin to fall.

The Pound Swiss Franc (GBP/CHF) exchange rate will be driven by political developments into the rest of this week.

Brexit and global trade developments will remain in focus, and with any further progressions between the US and China, we could see the Swiss Franc begin to lose out due to its safe-haven status.

Discussions between the EU and Switzerland will also remain in focus.

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