Worsening of UK Confidence Data could Drag GBP/CHF Exchange Rate Down
Pound Sterling (GBP) has fallen by -0.4% against the Swiss Franc (CHF) today, which has been caused by a negative reaction to the Autumn Budget reveal.
As well as a £400m provision for schools being labelled a sticking plaster, the budget also failed to show detailed plans for a no-deal Brexit outcome.
Looking ahead, the GBP/CHF exchange rate could worsen on Wednesday if GfK’s consumer confidence figure shows a forecast-matching decline.
The reading printed at -9 points in September and expectations are for a slide to -10 or -11 points.
Lower consumer confidence raises the risks of a slowdown in UK retail sales growth, as well as drop-off in consumer spending more broadly.
Cautious BoE Outlook could Ensure GBP/CHF Exchange Rate Losses
As well as risking losses on Wednesday’s data, the Pound to Franc (GBP/CHF) exchange rate could also drop off after Thursday’s Bank of England (BoE) meeting.
BoE policymakers are due to discuss interest rates and monetary policy in general, but current expectations are for no change from the current rate of 0.75%.
Of greater interest will be if BoE officials are considering a 2019 interest rate hike – it may be revealed that Brexit uncertainties are preventing commitment to higher rates.
If it looks like an interest rate hike next year might not be on the table, the Pound to Franc exchange rate could drop off.
Swiss Franc to Pound Outlook: Will Confidence Data and SNB Speech Boost CHF/GBP Exchange Rate?
The Swiss Franc (CHF) could trade higher against the Pound (GBP) on Wednesday, when Swiss confidence data and a central bank speech are due.
In the former case, Switzerland’s economic sentiment index for October is tipped to show an improvement with a shift from -30.8 points to -26.
The sentiment reading has been negative since July this year, so an improvement could raise hopes for a return to a positive level.
Additional support could come from Swiss National Bank (SNB) Chair Thomas Jordan, when he gives a speech on Wednesday afternoon.
Mr Jordan might raise support for the Swiss Franc by delivering an optimistic economic outlook.
The SNB has left interest rates at -0.75% since 2015, in a bid to reduce the value of the Swiss Franc.
If Mr Jordan suggests that the Franc might start to be devalued and that this could lead to an interest rate hike, the CHF/GBP exchange rate could rise sharply.
Risk of Swiss Franc to Pound (CHF/GBP) Exchange Rate Losses on Manufacturing Sector Slowdown
Looking further ahead, other economic data that could affect Swiss Franc demand will be the coming Wednesday’s manufacturing activity reading.
Covering October, the manufacturing data is tipped to drop from 59.7 points to 58.5.
While not a significant shift on paper, this result could still drain CHF trader confidence and weaken the Swiss currency due to the negative implications.
Reduced manufacturing sector activity in October could lead to a progressive decline over the coming months, potentially leading to a sub-50 point contraction reading.