Pound Sterling Swiss Franc (GBP/CHF) Exchange Rate Falls despite No-Deal Brexit Rejection
As Parliament entered a fresh day of Brexit debate the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate was unable to hold onto its ten-month high.
Investors initially reacted with optimism to news the MPs had voted in favour of ruling out a no-deal Brexit, spurring Pound Sterling (GBP) to trend higher across the board.
However, as the move paves the way for a protracted period of uncertainty the Pound struggled to hold onto its bullish trend for long.
As markets braced for fresh votes on a potential extension to the Article 50 deadline, as well as the possibility of a second referendum, this helped to limit the appeal of the Pound.
GBP exchange rates also came under pressure as a result of February’s disappointing RICS house price index, which showed a -28% decline on the month.
With the UK housing market continuing to deteriorate investors saw limited cause for confidence in the wider economic outlook.
Brexit Uncertainty Set to Limit GBP/CHF Exchange Rate Potential
The GBP/CHF exchange rate remains vulnerable to downside pressure in the days ahead as markets continue to lack clarity over the ultimate outcome of the Brexit process.
Until there are signs of certainty over the future of the UK economy this is likely to limit demand for the Pound, especially if political jitters pick up.
As Tim Riddell, senior market strategist at Westpac, commented:
‘Risk of a “no deal” exit has been reduced, but UK needs to gain agreement from EU on any form of extending the negotiating period.
‘Failure could force UK to revoke the tabling of Article 50 and could still trigger an unintended disorderly departure if EU refuses to any extension (though unlikely) and UK refuses to revoke Article 50. UK’s political divisions and ineffectiveness could lead to variety of other outcomes, but the EU Leaders’ Summit (21st – 22nd) is the near term focus.’
Market anxiety over Brexit looks set to persist as long as the issue of Brexit remains unresolved, limiting the potential for further Pound gains.
Swiss Franc (CHF) Benefits from Market Risk Aversion
With market risk appetite limited the safe-haven Swiss Franc (CHF) found some support, meanwhile.
Growing worries over the outlook of the global economy and signs of weaker Chinese production helped to boost CHF exchange rates on Thursday.
However, a fresh contraction in producer and import prices on the year soon dampened the mood towards the Franc.
As inflationary pressure within the Swiss economy remains lacking this limits the strength of CHF exchange rates, with domestic monetary policy looking set to remain looser for longer.
The Swiss Franc could falter next week if February’s trade balance shows a narrowing of the surplus, with any deterioration in trade likely to encourage a cautious policy outlook.