The Pound (GBP) to Swiss Franc (CHF) exchange rate firmed on Wednesday following the release of the latest UBS Consumption data, however further gains for the UK currency are likely to be restrained on expectations that the UK will join the USA and its allies in launching airstrikes against the Islamic State.
Sterling was edging towards its best level in two-years against the Franc after the UBS report showed that the consumption indicator declined to a reading of 1.35 in August, a steep decline from the 1.67 number recorded in July.
Last week the Franc began its downward trend after the Swiss National Bank cut its inflation forecast for 2015 to 0.2% and reduced its Gross Domestic Product (GDP) expectations from 2.1% to 1.3% for this year. For 2015, it lowered its expectations to a reading of 1.6%.
The drop in the consumption index was said to have been caused by a drop in all of the data’s sub indicators.
‘The domestic sector, previously a pillar of the Swiss economy, has lost much of its momentum,’ said UBS in a statement released alongside the data.
Also weighing upon the Franc was the Swiss Central Bank’s pledge to maintain the Euro/Swiss Franc target floor at 1.20. With the Euro, continuing to fall because of disappointing economic data releases the Franc is being dragged lower as well.
‘The SNB will therefore continue to enforce the minimum exchange rate with utmost determination. From mid-2015 onwards, inflation is set to be lower. This is mainly due to the deterioration in the global economic outlook and slower growth in Switzerland,’ the bank said in its September policy meeting.
The Swiss Central Bank also expects that the wider global economic recovery will be weaker over the coming quarters. Geopolitical concerns and worries over a weakening Chinese economy are set to cause the global economy to remain vulnerable.
Pound Sterling to Swiss Franc Exchange Rate Forecast
Further gains for the Pound were somewhat restrained on increasing expectations that the UK parliament will vote in favour of the country launching air strikes against the Islamic State in Iraq. Prime Minister David Cameron has recalled parliament and a vote on the issue is due to take place on Friday. A lack of market moving domestic data is also likely to restrain the currency’s movements.
The Franc was also forecast to come under pressure against the US Dollar (USD)
UPDATE
As the European session began on Thursday the Pound was trending over 0.2% higher against the Swiss Franc.
A lack of economic data for Switzerland could restrict movement in the GBP/CHF exchange rate today, but the pairing could consolidate and extend gains if Bank of England Governor Mark Carney offers any hawkish remarks in today’s speech.
The Confederation of British Industry’s Reported Sales data and the UK’s Average Weekly Earning’s figures will also be of interest.
Current Swiss Franc (CHF) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Swiss Franc,
,US Dollar,1.0637 ,
Swiss Franc,,British Pound,0.6484 ,
Swiss Franc,,Euro,0.8278 ,
Pound Sterling,, Swiss Franc,1.5419 ,
Euro,, Swiss Franc,1.2074 ,
US Dollar,, Swiss Franc,0.9398 ,
[/table]
