Pound Swiss Franc (GBP/CHF) Exchange Rate Muted as BoE Warns of ‘Significant Volatility’ due to Disorderly Brexit
The Pound Sterling Swiss Franc (GBP/CHF) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of 1.2361Fr.
On Thursday, the Bank of England’s (BoE) Financial Stability Report revealed it believed UK banks would survive a hard Brexit as well as a trade war.
In the report, the Financial Policy Committee stated:
‘The perceived likelihood of a no-deal Brexit has increased since the start of the year.
‘The UK banking system remains strong enough to continue to lend through the wide range of UK economic and financial shocks that could be associated with Brexit.’
However, the BoE warned that the UK could suffer ‘significant volatility’ due to a disorderly Brexit.
Increased Tensions in the Middle East Leaves Swiss Franc (CHF) Flat
The safe-haven Swiss Franc was left flat against the Pound on Thursday morning despite increased tensions in the Middle East.
The British government stated that three Iranian vessels attempted to block the passage of a UK ship through the Strait of Hormuz.
The Iranian vessels withdrew following warnings from a British warship.
Tensions in the area have been increasing over recent weeks as Iran moved away from the terms of a nuclear agreement it struck with world powers in 2015.
Sterling (GBP) Muted as UK Economy Boasts Modest Growth
On Wednesday, data from the Office for National Statistics revealed that the UK economy returned to growth in May.
Following a slump of -0.4% in April, the economy expanded by 0.3%.
In the three months to May, GDP rose by 0.3% and annual growth rose by a higher-than-forecast 1.5%.
However, in order to avoid a contraction in the second quarter, June’s figure will need to be strong.
Commenting on the data, Head of GDP at the ONS, Rob Kent-Smith noted:
‘GDP grew moderately in the latest three months, with IT, communications and retail showing strength.
‘Despite this, there has been a longer-term slowdown in the often-dominant services sector since summer 2018.’
Pound Swiss Franc Outlook: Will a Dovish BoE Speech Dampen GBP Sentiment?
Looking ahead to Friday, the Pound (GBP) could slide against the Swiss Franc (CHF) following a speech from the Bank of England’s (BoE) Gertjan Vlieghe.
If Vlieghe discusses monetary policy and his tone is overly dovish, it could dampen sentiment in Sterling.
Meanwhile, as trade discussions between the US and China continue investors could flock to the safe-haven Swiss Franc.
If there are signs of increased tensions between US and Chinese officials, the Pound Swiss Franc (GBP/CHF) exchange rate could fall.