Pound to Swiss Franc Exchange Rate Could Keep Rising Despite Fresh Brexit Speculation
Update 16:55 GMT 08/01/2018:
The Pound to Swiss France (GBP/CHF) exchange rate outlook was little changed throughout Monday’s session, but did briefly touch on a high of 1.3263 in the afternoon.
The pair continued to edge higher throughout the day as investors became more confident that UK Prime Minister Theresa May’s cabinet reshuffle would not lead to any notable differences in the way the government will handle the Brexit process.
As of the time of writing, no major changes have been made to the parts of May’s cabinet most heavily involved with Brexit.
[Published 12:10 GMT 08/01/2018]
While the Pound to Swiss Franc (GBP/CHF) exchange rate advanced last week due to a lack of appetite for ‘safe haven’ currencies like the Franc, Sterling’s (GBP) gains have been limited.
Last week’s UK PMIs from December were not particularly impressive and investors are still anxious about the upcoming year of tough UK-EU Brexit negotiations.
This week has seen UK Parliament reconvene from winter recess and UK Prime Minister Theresa May is expected to be reshuffling her cabinet in order to reassert her power following a tumultuous 2017 for the government.
Investors are focused on how May’s upcoming changes could hint at what tone the government will be taking in UK-EU trade negotiations, which are set to begin in March.
For example, if the new cabinet sees ‘soft Brexit’ advocates in stronger positions this would lead to a stronger hopes of a ‘soft Brexit’ tone in negotiations and a stronger Pound.
On the other hand, if May leans towards ‘hard Brexit’ advocates or makes a position to handle a potential ‘no deal Brexit’, the Pound could weaken considerably.
Swiss Franc (CHF) Falls as Investors Lose Appetite for ‘Safe Haven’ Currencies
Despite some decent Swiss Consumer Price Index (CPI) data on Monday, the Swiss Franc (CHF) has been falling against major currencies like the Pound and Euro (EUR) over the last week as investors have found ‘safe haven’ currencies less appealing.
As the global growth outlook is gradually rising and investors are concerned that the US economic outlook is not as strong as previously hoped, investors are less eager to hold onto safe currencies like the Swiss Franc.
This caused the Franc to weaken for most of last week’s trade. Franc investors are also unenthused on the currency due to expectations that the Swiss National Bank (SNB) would be keeping negative interest rates on hold for the foreseeable future.
Monday’s Switzerland inflation data came in at 0.8% year-on-year as expected, with the monthly figure coming in at 0.0% rather than the forecast -0.1%. This ended 2017 with the highest inflation rate for the nation in almost seven years but had little effect on Franc movement.
Pound to Swiss Franc Exchange Rate Forecast: UK Political Developments Could Influence GBP/CHF
This week’s UK data is unlikely to be particularly influential to Pound trade and the Swiss Franc is more likely to be driven by risk-sentiment in markets than Switzerland ecostats.
Probably the biggest potential for GBP/CHF movement this week will be how the first UK political news of the year affects the Brexit outlook, if at all.
UK Prime Minister Theresa May’s cabinet reshuffle, as well as any potential comments from UK officials about what the government hopes to secure in upcoming UK-EU negotiations, could all have an impact on the Pound outlook.
This week’s most notable UK data will be Wednesday’s UK trade balance update from November, as well as November’s industrial and manufacturing production results.
Tuesday will see the publication of Switzerland’s December unemployment and November retail sales results, which could influence the Franc slightly if they surprise.
Overall though, markets still don’t find ‘safe haven’ currencies too appealing this week and this could limit the Franc’s potential gains, even if Sterling weakens.
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