On Wednesday the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate was trending around the day’s opening levels as investors considered the UK’s employment report and the Swiss ZEW survey.
Switzerland’s ZEW Expectations survey for October plunged from -7.7 to -30.7 in October.
According to ZEW, the indicator’s ‘sharp decline in October is likely attributable to experts concerns that unfavourable economic developments in the Eurozone will spread to Switzerland’s economy. The present state of economic activity in the Eurozone is rates as ‘poor’ by the majority of financial analysts surveyed, resulting in a balance of the current economic situation score of minus 64.9 points. In contrast, the current state of economic activity in Switzerland is rated as surprisingly stable: As in the previous month one quarter of analysts assess the situation to be ‘good’ while the remainder judges it to be ‘normal’.’
Yesterday ZEW economic sentiment surveys for the Eurozone and its largest economy (Germany) came in well below expected levels.
The Eurozone Economic Sentiment Index plummeted from 14.2 to 4.1 while the German index slid from 6.9 to -3.6.
These were just the latest in a run of less-than-impressive economic reports for the Eurozone, adding to fears that the region may slide back into recession and compounding the case in favour of the European Central Bank rolling out further stimulus measures.
The Pound Sterling to Swiss Franc (GBP/CHF) hit a high of 1.5217
The Swiss Franc was also feeling the pressure as economists bet that the Swiss National Bank will opt to keep its Franc-Euro cap in place until 2016 as fiscal policy in the Eurozone loosens.
The cap has been in place for three years and was introduced as a safeguard against the threat of deflation.
In the opinion of industry expert Eric Tannenbaum; ‘With the ECB cutting interest rates and honing in on quantitative easing, the SNB will have no choice but to extend the timeframe of its currency cap against the Euro. The SNB will enforce this policy by either moving into negative-rate territory themselves, aggressively stepping up currency interventions, or both.’
The Swiss Franc to Euro (CHF/EUR) exchange rate fell to 0.8280 during the European session while the Swiss Franc to US Dollar (CHF/USD) exchange rate eased to 1.0476.
The Pound, meanwhile, garnered support against some of its currency rivals from a sharper-than-anticipated easing in the UK’s unemployment rate.
However, while the level of joblessness slid to 6% a soft inflation outlook and global pressures have left investors betting that the Bank of England will push back the timing of the first interest rate increase – limiting Sterling gains.
As stated by economists; ‘It has become increasingly clear that there has been a change in outlook. Both external risks and internal ones have the potential for the UK to experience a more significant slowdown in activity than in the Monetary Policy Committee’s central case.’
Pound Sterling to Swiss Franc Exchange Rate Forecast
Tomorrow’s Swiss SECO Economic Forecast for October could have an impact on the Swiss Franc.
If the report highlights the downside risks posed by the global economic slowdown and expectation of a Eurozone recession, the Franc may come under pressure.
Further Swiss and UK data is lacking for the rest of the week, but movement in the GBP/CHF exchange rate could occur as a result of speeches to be given by BoE officials – including the usually hawkish Martin Weale.
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,1.5142,
Euro,, Swiss Franc,1.2070,
US Dollar,, Swiss Franc, 0.9486,
Australian Dollar,, Swiss Franc, 0.8332,
New Zealand Dollar,, Swiss Franc,0.7474,
Canadian Dollar,, Swiss Franc,0.8369,
[/table]
