Pound to Swiss Franc Exchange Rate Advances despite Lack of Strong UK Data
Expectations that the Swiss National Bank (SNB) will be leaving Switzerland monetary policy near its loosest levels well after the European Central Bank (ECB) has begun tightening policy has helped the Pound to Swiss Franc (GBP/CHF) exchange rate to remain appealing.
Due to a fall in Bank of England (BoE) interest rate hike bets, GBP/CHF slipped from 1.3701 to 1.3644 last week. However, the pair also touched on a post Brexit-vote high of 1.3840 before this fall.
This week so far, GBP/CHF has resumed its climbs again despite a lack of supportive factors in Pound trade. On Wednesday morning the pair trended near this week’s high of 1.3713.
Market expectations of central bank policy divergence have been among the main reasons for Swiss Franc (CHF) weakness in recent months.
With GBP/CHF already putting in solid gains, the pair’s potential for gains could be even higher if key UK growth projections beat expectations at the end of the week.
Pound (GBP) Exchange Rates Benefit from Pharmaceutical News
Japanese pharmaceutical company Takeda appears to have reached a deal to purchase UK-listed drug-maker Shire, for a significant sum of £44b.
Following a series of rejections from Shire since March, the deal appeared to be reached this week and some analysts are calling it the biggest pharma deal of 2018.
The news was optimistic for markets, as it indicated that UK businesses were still appealing for foreign investment.
The huge sum of GBP that would flow into circulation if the deal goes through is also expected to give the British currency a boost.
On top of this, analysts continue to speculate that the Bank of England (BoE) could still hike UK interest rates more than once this year.
Swiss Franc (CHF) Unappealing on Central Bank Policy Divergence Expectations
Speculation for multiple Bank of England (BoE) interest rate hikes in 2018 put it at odds with the Swiss National Bank (SNB), which has continued to indicate that it will not be tightening monetary policy at all any time soon.
The bank’s persistent caution and dovishness has left investors expecting that the bank will leave monetary policy frozen even well after the cautious European Central Bank (ECB) has begun to tighten Eurozone monetary policy.
The Swiss Franc has been sold in recent weeks on the bank’s persistent dovishness and despite the currency hitting major lows the bank is showing no signs of changing its tone.
SNB Chairman Thomas Jordan said in an interview with Bloomberg TV last week:
‘We still have a relatively fragile situation, it can change from one day to the other, so we remain very prudent at this point,
It’s not the time today to talk about changing monetary policy. We are convinced that the current monetary policy is still necessary,’
Pound to Swiss Franc (GBP/CHF) Forecast: UK Growth Projections in Focus
The Pound to Swiss Franc (GBP/CHF) exchange rate outlook is likely to be driven by Friday’s UK Gross Domestic Product (GDP) projections from Q1, especially if they surprise investors.
As the UK growth report could influence Bank of England (BoE) interest rate hike bets, GBP/CHF will be driven higher if the growth data impresses.
Analysts forecast the UK growth rate will slow slightly from 0.4% to 0.3% quarter-on-quarter and remain at 1.4% year-on-year.
Strong UK growth would make investors more confident that the BoE could hike UK interest rates twice in 2018.
Perceived policy divergence between the BoE and the still highly cautious Swiss National Bank (SNB) would leave the Pound more appealing versus the Swiss Franc.
The Pound to Swiss Franc (GBP/CHF) exchange rate could also be driven by speeches from central bank bosses. BoE Governor Carney and SNB Chairman Jordan will both hold speeches on Friday.
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