Pound to Swiss Franc Exchange Rate Slumps but Losses May Be Limited
After making impressive gains last week, the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate is slumping today. Investors are piling into currencies correlated with safe haven sentiment. Meanwhile, the Pound (GBP) is seeing fairly limp trade.
Last week’s impressive movement saw GBP/CHF surge from 1.1876 to above the key 1.20 level. The pair ended the week at around 1.2191.
However, GBP/CHF has been unable to hold those gains. A weaker Pound slipped yesterday, and the pair slumped back towards the level of 1.2070 around the time of writing.
The safe haven Swiss Franc is surging on market sentiment today. Sterling lacks the drive to hold its ground, and Brexit uncertainties are worsening again as well.
Pound (GBP) Exchange Rates Struggling to Hold as Domestic Concerns Grow
The Pound was among the currencies benefitting somewhat from an improving global economic outlook. Hopes for economies to reopen and rebound from the coronavirus pandemic made investors more eager to take risks, which boosted Sterling.
However, its appeal has been increasingly limited.
Concerns are rising about Britain’s exit strategy from the coronavirus pandemic. Some businesses are frustrated with a planned 14-day quarantine for international arrivals.
On top of this, Brexit concerns are rising again as Britain runs out of time to request an extension to the transition period.
Fresh market aversion to risk-correlated currencies is also hitting the Pound today though. According to Ulrich Leuchtmann, Head of FX at Commerzbank, Sterling is becoming increadingly risk-correlated:
‘Sterling is highly sensitive to these changes in risk sentiment – it’s a more risky currency that it was a couple of months ago and some years ago,’
Swiss Franc (CHF) Exchange Rates Benefit from Data and Safe Haven Demand
The Swiss Franc experienced a jump in demand today. This was largely due to a jump in demand for safe havens, as various factors made investors hesitant to keep taking risks.
Weeks of appreciation in risk-correlated currencies, combined with some fresh trade jitters, have led to this morning’s surge in demand for safe havens.
The Swiss Franc is a traditional safe haven and was able to benefit strongly from the news.
However, domestic news also helped the Franc. Switzerland’s latest unemployment rate report showed unemployment worsening less than expected, to 3.4% instead of the forecast 3.5%.
It boosted hopes that Switzerland’s economy would be less hit by the coronavirus pandemic than feared, and helped with the Franc’s safe haven appeal.
Pound to Swiss Franc (GBP/CHF) Exchange Rate Selloff May Be Short-Lived
While the Pound to Swiss Franc (GBP/CHF) exchange rate is slumping today, this movement may not last that long.
If a brief jump in trade tensions cools for example, investors could refocus instead on the improving global outlook. As major economies continue to set out exit strategies for quarantine and lockdown, investors will continue to find riskier currencies appealing.
As a result, the Swiss Franc may struggle to hold much of today’s gains.
However, the Pound’s weakness and mixed outlook could still keep it from climbing much either.
If investors are unimpressed with the UK government’s handling of the coronavirus pandemic, or if Brexit jitters notably worsen, the Pound’s appeal will be limited.
The Pound to Swiss Franc (GBP/CHF) exchange rate outlook will continue to be driven by shifts in global risk-sentiment.