Better-than-Expected Fourth Quarter Swiss GDP Drags on Pound Swiss Franc Exchange Rate
As the fourth quarter Swiss gross domestic product report bettered expectations this drove the Pound to Swiss Franc (GBP/CHF) exchange rate lower ahead of the weekend.
While growth slowed sharply on the quarter, dipping from 7.6% to 0.3%, the lack of forecast stagnation helped the Swiss Franc (CHF) to push higher against its rivals.
A smaller-than-expected contraction in growth on the year also offered a boost to CHF exchange rates, even as the Swiss economy remains in a weaker state of health.
Demand for the Swiss Franc also picked up in response to February’s KOF leading indicators reading, which jumped from 96.5 to 102.7 on the month.
This suggests that the economy has continued to recover lost momentum since the start of 2021, giving investors incentive to pile back into the Franc this morning.
GBP Exchange Rates Soften as UK Car Production Extends Decline
Demand for Pound Sterling (GBP), meanwhile, weakened in the wake of January’s UK car production data.
Although markets had expected to see another sharp contraction on the year the extent of the decline in production ultimately caught investors off guard.
The -27.3% plunge in output highlights the continuing challenges facing the UK economy, particularly amid reports of increasing delays at the UK border.
With manufacturing sector showing signs of weakness worries over the health of the first quarter gross domestic product reading picked up, with investors bracing against the risk of a negative reading.
The mood towards the Pound could sour further next week with the release of January’s mortgage approvals figure.
As forecasts point towards a decline in mortgage approvals, indicating a slowdown within the housing market, anxiety over the health of the UK economy looks set to pick up once again.
Slump in Retail Sales Forecast to Weigh on Swiss Franc Appeal
On the other hand, the Swiss Franc may struggle to hold onto its stronger footing on Monday if the fresh Swiss retail sales data fails to impress.
With forecasts suggesting a -1.8% monthly decline in sales at the start of 2021 CHF exchange rates could find themselves under renewed pressure.
Evidence of a decline in domestic consumer confidence could put a dampener on the Swiss Franc, with weaker retail sector activity likely to drag on the wider economy.
However, any CHF exchange rate downside could ultimately prove limited as long as the wider sense of market risk aversion lingers.
Increased demand for safe-haven assets in the face of the ongoing pandemic and global trade worries could help to lift the Franc against its rivals, leaving the Pound to Swiss Franc exchange rate to extend its downtrend.