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GBP/CHF Forecast: Pound to Swiss Franc Exchange Rate Avoids Losses as Franc Unappealing

March 23, 2021 - Written by John Cameron

Despite weaker demand for the Pound today, the British Pound to Swiss Franc (GBP/CHF) exchange rate is recovering from weekly lows. The Pound has been able to recover a little as markets continue to find the Swiss Franc broadly unappealing. Investors may remain hesitant to buy the Swiss Franc ahead of Thursday’s Swiss National Bank (SNB) policy decision, but the Pound could still if upcoming key UK PMI and retail sales results disappoint investors.

The Swiss Franc has been attempting to benefit from higher safe haven demand to recover from its worst levels in recent weeks. Last week saw GBP/CHF open at the level of 1.2947 and close lower, in the region of 1.2893.

This week’s GBP/CHF movement has been dovish once again. At the beginning of the week, GBP/CHF slumped to a low of 1.2177 - the pair’s worst levels since the beginning of March. At the time of writing however, GBP/CHF is attempting to recover and is trending in the region of 1.2858.

Pound Sterling (GBP) Exchange Rates Supported by UK Data but Gains Limited by Vaccination Jitters

The UK economic outlook remains generally appealing this week. Investors continue to bet that Britain’s economy will be one of the first major economies to recover from the coronavirus pandemic.

This, as well as today’s solid UK data, is helping to buoy the Pound and keep it higher against a weak Swiss Franc.

Today’s UK job market report beat expectations in many key prints. Britain’s employment change saw less jobs lost than expected, while the key unemployment rate improved more than expected to 5.0%.

It was followed by the Confederation of British Industry’s (CBI) March industrial trends orders report, which also beat forecasts with a smaller than expected contraction of –5.

According to Anna Leach, CBI Deputy Chief Economist:

‘It’s great to see the mood lift among manufacturers, buoyed by a jump in order books. But firms continue to grapple with higher freight costs as well as raw material shortages. Consequently, manufacturers anticipate prices to grow at a quick pace next quarter.

Meanwhile, risks to growth in European markets are elevated given the slow pace of vaccine roll-out and the likelihood of further lockdowns.’

Concerns about UK-EU trade tensions over coronavirus vaccine shipments, as well as market aversion to riskier currencies, weighed on the Pound a little today.

Still, the safe haven Swiss Franc was ultimately the less appealing of the two currencies.

Swiss Franc (CHF) Exchange Rates Fail to Benefit from Safe Haven Demand as SNB Dovishess Expected

Despite a rise in market demand for safe haven currencies in recent sessions, the safe haven Swiss Franc has been unable to capitalise on this movement.

The Swiss Franc remains weak, even after a long period of poor performance and very limited rebound attempts.

Markets see little reason to buy the Swiss Franc, due to a lack of any hawkish signals or expectations from the Swiss National Bank (SNB).

Expectations for continued dovishness from the SNB are keeping the Swiss Franc under pressure this week as well. The SNB is predicted to keep the world’s lowest interest rate frozen during this week’s upcoming policy decision.

According to GianLuigi Mandruzzato, Senior Economist at EFG Asset Management:

‘The SNB will be in no hurry to tighten its monetary policy stance as the economy recovers from the pandemic shock,

SNB will want to be late in signaling a tightening also to prevent more upward pressure on the Swiss Franc.’

GBP/CHF Exchange Rate Forecast: UK Data and Swiss National Bank (SNB) Ahead

There are many developments expected in the UK and Switzerland this week, which could influence the direction of the Pound to Swiss Franc exchange rate.

Tomorrow will see the publication of UK inflation rate and PMI projection data. These will give investors a better idea of how Britain’s economy is performing amid the coronavirus pandemic.

Thursday will follow with the Swiss National Bank’s (SNB) March policy decision. The bank is not expected to make any changes to monetary policy.

However, if the bank shows any signs at all that it could become more hawkish, the Swiss Franc could see a surging recovery.

Friday will round off the week with UK retail sales results from February.

These events, as well as coronavirus developments and shifts in market sentiment, will drive the Pound to Swiss Franc exchange rate this week.
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