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GBP to CHF Exchange Rate Fails to Hold 5-Month-Best despite Announcement of New UK-EU Brexit Deal

October 17, 2019 - Written by Tim Boyer

Despite today’s news that a new UK-EU Brexit deal has finally been reached, the British Pound to Swiss Franc (GBP/CHF) exchange rate only briefly touched on best levels today before sliding and trending lower again. Resilience in the Swiss Franc, combined with lasting uncertainty over whether the Brexit deal would actually pass through UK Parliament, limited market demand for the pair today.

Following last week’s impressive GBP/CHF gains from 1.2279 to 1.2610, GBP/CHF is on track to see further gains this week so far.

This morning, fresh Brexit developments briefly shot GBP/CHF to a high of 1.2851, which was the best level for the pair since May. However the pair has failed to sustain its highs and was trending near the level of 1.2744 at the time of writing.

As the Swiss Franc is the market’s safe haven currency of choice today, further movement in the Pound to Swiss Franc exchange rate could be driven by developments in Brexit and US-China trade tensions through the end of the week.

GBP Exchange Rates Fail to Hold Best Levels amid Concerns of Domestic Support

Demand for the Pound has been all over the place today, following the overall volatile trend seen this week, as the Brexit process may be reaching its climax.

For much of the week, the Pound rose on speculation that a new UK-EU Brexit deal was within reach, and slid on fears that negotiations could fall through or that the deal could fail.

This morning, UK Prime Minister Boris Johnson and European Commission President Jean-Claude Juncker announced that a new Brexit deal had officially been reached. This briefly led to a surge in Pound demand.

However, that optimism was quickly tempered. The deal is expected to be presented to UK Parliament on Saturday, but amid concerns that the deal lacks the domestic support needed to pass the Pound’s bullishness was short-lived.

Northern Ireland’s DUP Party, a key ally for the minority Conservative Party government in recent years, has indicated it will not support the deal.

Britain’s opposition Labour Party has also said it will not support the deal, and will instead support a general election or a referendum on the deal.

According to Craig Erlam from OANDA:

‘It’s going to be a wild weekend which will make the market open next week all the more unpredictable. If the deal gets through Parliament, the pound could perform extremely well at the start of next week, despite having already rebounded more than 8% from the lows a month ago.

Lastly, EU officials indicated they would not be granting Britain a Brexit extension due to the deal being met, which led to fresh Pound losses this afternoon.

CHF Exchange Rates Benefit from Weakness in Rival Safe Havens

The Swiss Franc is a safe haven currency that often benefits in times of global uncertainty. As a result, it has been able to avoid significant losses against the Pound this week due to the market’s persisting demand for safe havens.

US-China trade tensions have persisted, and hopes of a preliminary trade deal being reached imminently have been doused by comments from US and China officials in recent sessions.

This has made investors eager to buy safe haven currencies, but weak US data and concerns that the US economy could continue to be negatively impacted by the trade war have made the safe haven US Dollar unappealing.

The Swiss Franc has benefitted more from safe haven demand and US Dollar weakness as a result.

Today’s Swiss trade balance data from September also supported the Franc, as it showed a bigger than expected trade surplus.

GBP/CHF Exchange Rate Forecast: No-Deal Brexit Fears Could See Pound Losses

After another volatile day for the Pound, the British currency could be in for even more mixed movement in the coming sessions.

While a UK-EU Brexit deal has been announced, markets will now be looking for signs of support on the UK deal domestically.

If the deal is perceived as lacking the support needed to be passed through UK Parliament, the Pound could be in for major losses in the coming sessions as fears would rise that a no-deal Brexit is still possible.

The EU has indicated it may not grant Britain an extension, and UK Prime Minister Boris Johnson has said he does not want to extend the process either.

If the deal is expected to be blocked by parliament, Sterling may not perform very well tomorrow. The Pound would plummet on Monday if the deal is blocked on Saturday.

As for the Swiss Franc, any surprising developments at this weekend’s Swiss Parliamentary Elections could cause some Pound to Swiss Franc exchange rate movement as well.
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