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Pound Sterling Swiss Franc (GBP/CHF) Exchange Rate Buoyed by Decreased UK Recession Risk

September 9, 2019 - Written by John Cameron

Pound Swiss Franc (GBP/CHF) Exchange Rate Rises as Service Sector Boosts UK Growth

The Pound Sterling Swiss Franc (GBP/CHF) exchange rate rallied and the pairing is currently trading at an inter-bank rate of 1.2247Fr.

Better-than-expected UK growth data buoyed Sterling, allowing the pairing to rise to its highest level since the end of July.

Fears the UK could slide into a recession were calmed as the UK services sector supported growth, causing the economy to expand by 0.3% in July.

However, the Office for National Statistics (ONS) revealed that in the three months to July economic growth stagnated.

Commenting on the data, Head of Economics at the British Chambers of Commerce (BCC), Suren Thiru said:

‘The service sector made the only positive contribution on the three-month measure, with industrial production and construction dragging on UK growth. Despite a boost in July, the manufacturing sector remains an area of concern with tightening cashflow, concerns over disrupted supply chains and weakening demand in key markets weighing on activity in the sector.

‘While the near-term outlook remains challenging, the UK economy should avoid entering a recession this quarter.’

Brexit Optimism Buoys the Pound (GBP)

Sterling received further support at the start of the week as optimism the UK would avoid a chaotic no-deal Brexit.

However, reports have suggested there is some uncertainty over whether the European Union will allow the UK to extend Article 50 again.

French Foreign Minister, Jean-Yves Le Drian said ‘in the current circumstances’ France would vote against an extension, and added:

‘We are not going to go through this every three months.’

Meanwhile, Downing Street confirmed that the five-week suspension of parliament will begin later this evening which could cause further movement in Sterling exchange rates.

This will come after MPs vote for the second time on a snap general election to take place in October.

Opposition leaders have confirmed they would not be voting in favour of an election as they want the Brexit delay bill to be implemented first.

On Monday afternoon the bill aimed to block a no-deal Brexit received royal assent, which forces the Prime Minister to request a Brexit delay to January 2020.

Swiss Franc (CHF) Slumps despite Unemployment Holding at 17-Year Low

The Swiss Franc slumped against the Pound despite data revealing Switzerland’s unemployment remained steady at 2.1% in August.

This morning’s data was in line with forecasts, and the seasonally adjusted unemployment rate remained at its lowest level since April 2002.

Meanwhile, on Friday Chair of the Swiss National Bank, Thomas Jordan said the bank had ruled out issuing helicopter money.

The printing of cash and handing it out to citizens would increase both inflation and consumer spending.

Jordan noted that the tactic did not make any sense and was against the country’s constitution.

He added:

‘Giving away free money is really a political decision and no something that should be taken by a central bank.’

Pound Swiss Franc Outlook: Will Surprise Rise in Average Earnings Buoy GBP?

This evening it is likely the Pound (GBP) may edge up against the Swiss Franc (CHF) following MPs vote on a general election.

If MPs vote against an election as expected, it is likely to provide Sterling with a slight upswing of support.

Looking ahead to Tuesday, the Pound could continue to edge up against the Swiss Franc following the UK average earnings data.

If earnings rise higher than expected in July, the Pound Swiss Franc (GBP/CHF) exchange rate is likely to rise.

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