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Pound Swiss Franc (GBP/CHF) Exchange Rate Defies Downtrend as Safe-Haven Demand Falters

August 21, 2019 - Written by Frank Davies

Lack of Safe-Haven Demand Benefits Pound Sterling Swiss Franc (GBP/CHF) Exchange Rate

As general market sentiment improved this helped to keep the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate on a positive footing.

Weak levels of safe-haven demand dragged the Swiss Franc lower across the board on Wednesday, in spite of the latest signs of deterioration in the US-China trade relationship.

With investors betting on the prospect of the Federal Reserve cutting interest rates at its next policy meeting demand for higher-yielding assets picked up.

This left the Swiss Franc under pressure, allowing the GBP/CHF exchange rate to recover some ground over the course of the day.

Disappointing UK Fiscal Data Weighs on Pound Sterling (GBP) Demand

Even so, the mood towards Pound Sterling also soured, deteriorating in response to July’s disappointing UK public sector net borrowing figure.

A weaker-than-expected budget surplus of 1.3 billion resulted from government spending outpacing an increase in monthly income.

This raised fresh concerns over the UK’s fiscal health, given Boris Johnson’s recent spending pledges and the need to offset the negative impact of a potential no-deal Brexit.

As a result, the GBP/CHF exchange rate struggled to make any significant headway on Wednesday.

CHF Exchange Rates Vulnerable to Easing Swiss Industrial Production

The second quarter Swiss industrial production report appears unlikely to offer CHF exchange rates any particular rallying point on Thursday.

With forecasts pointing towards a sharp loss of momentum for the industrial sector worries over the outlook of the Swiss economy look set to persist.

If markets continue to bet on the prospect of the Fed cutting interest rates imminently this could also keep the Swiss Franc on the back foot.

Unless market risk appetite deteriorates the safe-haven Swiss Franc may struggle to claw back its losses in the near term.

Weak UK Retail Sales Growth Set to Fuel GBP/CHF Exchange Rate Softening

Support for the Pound may also prove limited this week, however, as the CBI reported retail sales index is forecast to remain in negative territory.

Fresh evidence of weaker consumer confidence could exacerbate market anxiety over the economy’s resilience in the face of ongoing Brexit-based uncertainty.

Political developments may also fuel Pound selling in the days ahead as Boris Johnson continues to call for the scrapping of the Irish backstop.

Without officials demonstrating a willingness to compromise to reach an agreement ahead of the October deadline, the threat of a no-deal Brexit may keep the GBP/CHF exchange rate biased to the downside.
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