Pound Sterling Swiss Franc (GBP/CHF) Exchange Rate Muted as Switzerland Suffers Worst Slump in 40 Years
The Pound Sterling Swiss Franc (GBP/CHF) exchange rate remained flat, leaving the pairing trading at around 1.1998Fr.
The Swiss Franc remained under pressure today after the latest growth data revealed Switzerland entered a recession.
The coronavirus crisis caused the largest ever fall in GDP, with the economy shrinking by -8.2% in the second quarter. This followed a revised -2.5% fall in the first three months of 2020.
The government noted that the pandemic had triggered the worst quarterly contraction in 40 years.
The State Secretariat for Economic Affairs (SECO) noted:
‘Domestic economic activity was severely restricted in the wake of the pandemic and the measures taken to contain it.’
Switzerland’s downturn was made worse by the global recession, which has hurt the export-reliant country.
However, the country has fared better when compared to other countries, including Britain which suffered a huge slump of over -20% in Q2.
According to SECO economist, Ronald Indergand, the country avoided further damage by easing lockdown restrictions earlier than many other countries. He noted:
‘It’s bad, but not as bad as we first feared. The full recovery is going to take a year or two. By end of 2021 we may reach pre-crisis levels.’
Sterling (GBP) Traders Await Jackson Hole Symposium
The Pound remained flat against the Swiss Franc as traders awaited the upcoming annual Jackson Hole conference. Traders will be on the lookout for hints about monetary policy which could cause market movement.
The British currency has brushed off the latest car production data which revealed production recovered in July. Although, it was still down -21% compared to a year earlier.
Added to this, data showed the country saw the fastest cut in service sector jobs on record in the three months to August.
Traders are eagerly awaiting for signs that US Federal Reserve Chief, Jerome Powell will alter the central bank’s monetary policy framework to help boost inflation. This move would allow interest rates to remain low for longer.
Added to this, Sterling traders have been eagerly awaiting a speech from the Bank of England (BoE) Governor. Andrew Bailey is also expected to speak at the event which is being held virtually.
Meanwhile, the British currency also shrugged off further Brexit pessimism overnight. German Chancellor Angela Merkel removed Brexit from the agenda of a EU ambassadors meeting next week, citing a lack of progress in negotiations.
Marshall Gittler, BD Swiss’ head of investment noted:
‘The rise in GBP is yet another sign that the market is ignoring Brexit.
‘It’s been expected that German Chancellor Merkel could play a crucial role in breaking any deadlock, but it appears she’s giving up hope. GBP fell briefly on the news but it didn’t last long.’
Pound Swiss Franc Outlook: BoE Governor Bailey Speech in Focus
Looking ahead to Friday morning, the Swiss Franc (CHF) may edge higher against the Pound (GBP) following the latest KOF Leading Indicators.
If Switzerland’s latest data jumps higher than expected in August, it will offer the Franc an upswing of support.
Meanwhile, Sterling traders will be focused on the annual Jackson Hole symposium and the Bank of England (BoE) Governor’s speech.
If Governor Andrew Bailey’s speech is overly dovish, and he hints the bank may need to resort to sending interest rates into negative territory, GBP will fall. This will send the Pound Swiss Franc (GBP/CHF) exchange rate lower at the end of the week.