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GBP/CHF Forecast: Pound to Swiss Franc Exchange Rate Slumps from Year’s Best as Investors Head for Safe Havens

February 26, 2021 - Written by Tim Boyer

The Pound’s strong streak may have come to an end for now as investors took profit from the British currency’s bullish February, and the British Pound to Swiss Franc (GBP/CHF) exchange rate has been tumbling from its best levels on new demand for the Swiss Franc as well. The Swiss Franc is a safe haven currency which is often appealing in times of global market uncertainty, so it is benefitting from this week’s bonds rout.

After opening this week at the level of 1.2561, GBP/CHF spent most of the week trending with an upside bias. In the middle of the week, GBP/CHF was surging and touched on a high of 1.2877 - the best level for the pair in over a year.

GBP/CHF attempted to hold near these highs, but towards the end of the week the pair has tumbled back. Investors are selling the Pound from highs and buying the safe haven Franc, and as a result GBP/CHF is trending just above the week’s opening levels again at the time of writing on Friday.

Pound Sterling (GBP) Exchange Rates Sold from Best Levels ahead of Next Week’s UK Budget

After surging in an impressive and broad rally throughout most of February, the Pound is tumbling back from its best levels as the month draws to an end.

There wasn’t much UK news behind the drop. Instead, analysts are seeing the move as a relatively limited correction as investors take profit from the British currency’s best levels in months or even years against some major.

The Pound has also been hit by a new rout in global bonds. As the Pound has become more closely correlated to risk in recent years due to Brexit and the coronavirus pandemic, it has taken a knock from this risk-off movement in markets as well.

According to Alex Kuptsikevich, Senior Market Analyst at FxPro:

‘Rising yields in the US, European and Japanese debt markets have sharply reduced risk assets’ attractiveness.

Currencies and emerging markets were hit especially hard yesterday.’

The Pound outlook remains fairly appealing overall though. While Britain’s economic activity has been mixed in recent months, Britain is still expected to be one of the first major economies to recover from the coronavirus pandemic.

Swiss Franc (CHF) Exchange Rates Benefit from Market’s Rush into Safe Havens

The Swiss Franc is a traditional safe haven currency. It is a currency that is most appealing in times of global economic uncertainty, due largely to Switzerland’s perceived economic resilience.

As a result, it is one of the currencies to have been hit hardest by the surge in optimism over a recovery from the coronavirus pandemic.

However, this also means it is one of the currencies which has benefitted strongly from the rush into safer assets seen across global markets since yesterday.

Yesterday saw a sudden selloff in government bonds, driving up bond yields and causing a broad rout in shares and riskier assets across the global market.

This has led to a surge in demand for safe havens as well, including the Swiss Franc.

On top of the global risk-off movement benefitting the Swiss Franc today though, stronger than expected growth data from Switzerland is keeping the currency appealing.

Today saw the publication of many key Swiss ecostats. Non-Farm Payrolls, leafing inidcators and growth rate results all beat forecasts, showing that Switzerland’s economy was weathering the coronavirus pandemic better than expected.

Reacting to Switzerland’s better than expected growth, the State Secretariat for Economic Affairs said:

‘On the whole, the second wave of the coronavirus until the end of 2020 had much less of an impact on the economy than the first wave did last Spring’

GBP/EUR Exchange Rate Forecast: More Key Swiss Data Due Next Week

Next week will see the publication of a lot more notable data from Switzerland, which could drive Swiss Franc movement throughout the week.

Monday will see the publication of Swiss retail sales results from January and manufacturing PMI data for February. Wednesday will follow with inflation rate results and foreign exchange reserves data is due on Friday.

A combination of strong Swiss data and slightly higher market demand for safe havens would keep the Swiss Franc appealing throughout the week.

On the other hand though, the current market rout may not last. If investors begin to lose interest in safe havens again, strong Swiss data may only limit Swiss Franc losses but not prevent them.

As for the Pound, next week’s UK economic calendar will be a little on the quiet side. Britain’s final February PMIs from Markit could influence Sterling movement though.

The Pound remains appealing on UK coronavirus recovery hopes overall, so the Pound to Swiss Franc (GBP/CHF) exchange rate still has potential to climb in the coming week or so.
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