Pound Swiss Franc Exchange Rate Surges Monday
After trending flatly for most of the morning, the Pound Swiss Franc exchange rate soared later in the session due to comments made by UK Prime Minister Theresa May on what the nature of the Brexit process could entail to make it easier for businesses.
Speaking at this week’s CBI conference, May indicated the government could aim for a Brexit transition period. This theoretical period would last months to years after Brexit negotiations are complete and allow the UK to gradually withdraw from the EU rather than immediately.
This would allow businesses to ease into the new economy. This news cheered markets considerably amid fears that market conditions would suddenly change one day in 2019.
Sterling was able to easily advance against the Franc and with underlying factors pressuring the Franc GBP CHF could see another set of gains this week.
(Published 11:54 GMT 21/11/2016)
The Pound Swiss Franc exchange rate fluctuated in a relatively wide region but scarcely moved much throughout last week’s session.
As the Pound weakens this week some predict GBP CHF will fall from its current levels around 1.24 in the short-term, but comments from the Swiss National Bank (SNB) warning against the Franc’s overvaluation could leave the exchange rate higher in the mid to long-term future.
Pound (GBP) Strength Fades on Renewed Brexit Concerns
Long-term worries once again limited the Pound’s strength on Monday, as traders cooled on US election reactions and began to focus on the UK’s ongoing Brexit situation once more.
While Sterling was held afloat by an impressive UK retail sales report from October last week, as well as hopes for stronger UK-US trade under the Trump administration, this bullishness didn’t last and the British currency was left limp on Monday.
With UK Chancellor Philip Hammond set to make his Autumn budget statement on Wednesday, the chancellor played down the nation’s post-Brexit economy over the weekend, leading some to believe his upcoming forecast would be more dovish than hoped. This weighed on Sterling demand on Monday.
Swiss Franc (CHF) Weak on Threat of SNB Intervention
The Swiss Franc has seen poor performance in November so far, heavily weakened by the results of the US election as traders head to the US Dollar rather than holding in the ‘safe haven’ Franc.
Wanting to benefit from prospects that the US economy may see a short-term economic boost under Trump’s Presidency, traders flocked away from the Franc to the US Dollar instead, allowing the Pound to more easily hold its ground against the weakened Franc.
However, despite its recent losses the Swiss National Bank (SNB) still considers the currency to be ‘significantly overvalued’. The SNB reminded markets that it would be willing to intervene in foreign exchange markets if the Franc begins to surge and its value climbs too high.
This has left CHF trade limp despite seeing decent performance over the last week.
Pound Swiss Franc Long-Term Forecast: Downside Factors Limited by SNB Intervention Possibility
While typically the Pound may slump against the Swiss Franc as Brexit concerns return, its losses may be limited in the mid to long-term due to the ongoing possibility of a Swiss National Bank (SNB) foreign exchange market intervention.
This means that even if traders begin to fear the effects of a hard Brexit and sell off the Pound once more, it may see significant support against the Swiss Franc going forward, especially if it nears GBP CHF’s yearly lows of under 1.20 seen at the beginning of the month.
However while Pound bullishness has run out, it’s not hugely bearish either. GBP CHF could continue to see relatively thin movement in the coming weeks unless US President-elect Trump’s cabinet picks shock global markets.
If Trump’s final staff picks include anti-trade officials, traders may rush away from the US Dollar into other ‘safe havens’ like the Swiss Franc. This could see GBP CHF plummet and could inspire long-term sturdiness in the Franc only held back by the SNB’s intervention threats.
On the other hand, if Trump picks pro-trade staffers, CHF traders could pile into the US Dollar once more and increase the chances of a mid to long-term upward trend in GBP CHF.
At the time of writing, the Pound Swiss Franc exchange rate traded at around 1.24, while the Swiss Franc Pound exchange rate trended in the region of 0.80.
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