The Pound to Swiss Franc (GBP/CHF) exchange rate stayed bullish through Wednesday’s session after the Bank of England meeting minutes showed the gloomy outlook of inflation may be subject to change in coming months.
The minutes suggest that the 2% target could be reached if interest rates remain low and spare capacity in the economy is used up at a quicker than forecast rate rather than struggling for the next three years as some BoE members suggested.
The Pound to Swiss Franc (GBP/CHF) exchange rate advanced after the BoE released its latest meeting minutes. The Monetary Policy Committe saw a 2:7 split amongst policymakers which has been the case in the last four meetings.
However, with inflationary pressures looming, it appears as if the UK interest rate is scheduled to remain at its historic low for some time. The minutes stated: ‘There was a risk that growth might soften further than anticipated [and if the MPC raised rates it] would leave the economy vulnerable to shocks.’
Pound Softer Versus Safe-Haven Swiss Franc (GBP/CHF)
Earlier in the session… The Pound to Swiss Franc (GBP/CHF) exchange rate continued its losing streak on Wednesday ahead of the Bank of England’s (BoE) meeting minutes. The minutes will detail how many members of the Monetary Policy Committee (MPC) voted in favour of a rate hike.
Meanwhile, the Swiss National Bank (SNB) is expected to keep its cap on the Swiss safe-haven asset until 2017 as a defence against the European Central Bank’s somewhat unorthodox measures. This week has seen the Swiss Franc to Euro (CHF/EUR) exchange rate reach a 26-month high as investors price in the prospect of further ECB action in the hope of increasing inflationary levels.
Pound to Swiss Franc (GBP/CHF) Exchange Rate Falls
As Tuesday’s European session continues, the Pound to Swiss Franc (GBP/CHF) exchange rate maintains its downward trajectory. The Pound has fallen due to inflation remaining near a five-year low in October which has offered further support to Bank of England doves who wish to keep interest rates low.
Forex expert Kathleen Brooks commented: ‘Inflation may have picked up but it is still low and there are plenty of things that could push it lower. We are bearish on the Pound. The BOE is likely to delay raising rates until late 2015. We expect dovish minutes tomorrow.’
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate extended its losses after the UK Consumer Price Index figures. Inflation in the UK rose on the year in October to 1.3% from 1.2%. However, the Core CPI gauge failed to grow as economists’ had forecast, instead stagnating at 1.5%.
Economist Martin Beck commented: ‘October’s uptick in inflation is largely a function of base effects and movements in volatile categories. Otherwise, the inflationary trend is downward and there is a good change that the CPI measure will drop back again over the next couple of months. It looks increasingly likely that inflation will dip below 1% in the early months of 2015.’
While the Pound may not have been able to gain against the Swiss Franc, the Pound has been able to creep higher versus the US Dollar (GBP/USD).
Swiss Franc Reclaims Losses in CHF/GBP Exchange Rate
The Pound to Swiss Franc (GBP/CHF) exchange rate slid on Tuesday after the Pound made a hefty advance against the safe-haven asset on Monday. Furthermore, the Pound is trending lower versus other currency majors ahead of the UK Consumer Price Index.
With statements from Bank of England (BoE) Governor Mark Carney last week suggesting that inflation could drop below 1% in the next six months, CPI figures are likely to impact the Pound quite significantly.
Furthermore, the Pound has depreciated by 9% since the middle of 2014 when it reached five-year highs. One major factor in Sterling softnening is the delay of interest rate hikes by the Bank of England.
On Monday, the Pound saw a market movement of 0.47% in the GBP/CHF exchange rate ahead of UK Consumer Price Index (CPI) figures. The Consumer Price Index is forecast to gain by 0.1% in October, with the annual figure stagnating at 1.2%. After the recent statements by Bank of England (BoE) Governor Mark Carney regarding the potential drop in UK inflation, investors in the Pound will eye the latest CPI figures carefully.
Further Sterling movement could occur on Wednesday when the BoE releases its latest Meeting Minutes–an event that will reveal the split between policy-makers on the Monetary Policy committee (MPC). In the last three meetings, two of the nine board members have broken away from the general consensus and voted for immediate interest rate hikes.
Swiss Gold Referendum allows Pound Sterling Exchange Rate (GBP/CHF) to Gain
The Pound to Swiss Franc (GBP/CHF) exchange rate recorded gains as investor sentiment in the Swiss currency fell ahead of the gold referendum. The Pound was offered little support from the Bank of England (BoE) which further emphasised its dovish view on the UK economic recovery. BoE Governor Mark Carney spoke as Chairman of the Financial Stability Board in Brisbane stating that financial reform amongst world leaders needed to be finalised.
Carney also commented on the very real threat of low inflation in the UK stating: ‘How can it be that in the UK, where the economy had been growing at 3% for the past year and a half years, that interest rates are at half a percent? There is still slack in the labour market in the UK. We’ve got huge disinflationary forces coming from our trade partners, particularly in Europe, and commodity prices have gone down quite sharply… In fact, it takes us three years to get inflation back up to 2% on our forecasts.’
Earlier on Monday, the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate made small advances after the recent G20 meetings. UK Prime Minister David Cameron announced at the G20 summit in Brisbane that the global economy is in danger of lapsing into another crisis as growth stagnates.
Last week saw fears surround the Swiss Franc and Euro (CHF/EUR) currency pair ahead of the upcoming Swiss gold referendum. The ‘Swissie’ is tied to the Euro with a cap of 1.20, a measure that has been under threat of late.
SNB in Favour of Forex Reserves, Against ‘Save Our Swiss Gold’ Initiative
The Swiss National Bank (SNB) has announced that it opposes the ‘Save Our Swiss Gold’ initiative which would see the central bank forced to retain 20% of its assets in Swiss gold.
At present the SNB prefers to keep foreign currency reserves which have the benefit of greater liquidity and the ability to intervene in exchange rates.
SNB board member Fritz Surbruegg commented: ‘The threshold [CHF/EUR cap] has been crucial and needs to remain in place for as long as necessary. If the initiative goes through, our capacity to intervene on currency reserves will be reduced dramatically, with unfavourable consequences for the Swiss economy.’
The Swiss gold referendum will take place on November 30th and will probably cause a great deal of fluctuation for the Swiss Franc. However, the SNB may need to step in to defend the currency cap if it looms ever closer to the 1.20 mark.
Pound to Swiss Franc (GBP/CHF) Exchange Rate Forecast
Wednesday could prove to be highly influential for Swiss Franc movement this week with the release of the Swiss ZEW Survey Expectations for the month of November. October’s report resided at -30.7.
Swiss Trade Balance figures are out on Thursday. They are expected to show the surplus rise from 2.45B to 2.57B. Imports and Exports ecostats will also accompany the Trade Balance to give more detail on how the Swiss economy is performing.
Fritz Surbruegg will also speak in Geneva on Thursday which could also alter the CHF/GBP exchange rate.
The Pound to Swiss Franc (GBP/CHF) is currently trading in the region of 1.5033.
Swiss Franc (CHF) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,Swiss Franc , 1.4955,
US Dollar,,Swiss Franc , 0.9572,
Euro,,Swiss Franc , 1.2007,
Australian Dollar,,Swiss Franc , 0.8293,
New Zealand Dollar,,Swiss Franc , 0.7640,
[/table]
