Pound Sterling Swiss Franc (GBP/CHF) Exchange Rate Muted as Britain’s Borrowing Jumps
The Pound Sterling Swiss Franc (GBP/CHF) exchange rate was left flat, leaving the pairing trading at around 1.1898Fr.
The Pound struggled to make significant gains against the Franc on Tuesday. This comes despite an increase in optimism over a coronavirus vaccine and agreement from the EU.
The agreement from the bloc on a crucial recovery fund offered GBP support against other major currencies and allowed it to extend Monday’s rally.
The start of the week saw Sterling enjoy its best day in three weeks as investors focused on the upswing in risk appetite and overlooked downbeat data and little progress in UK-EU post-Brexit talks.
Early data from trials of three possible coronavirus vaccines also offered support and commenting on this, Lee Hardman, MUFG Strategist said:
‘Generally, it’s more about improvement in general risk sentiment. When you have risk on in equities, the Pound generally benefits.’
However, the latest borrowing data from the British government limited gains against the Swiss Franc.
Borrowing soared to a record £127.9 billion in the first three months of the financial year. This was more than double the total for the 2019/2020 financial year.
This, added with the risks of Brexit means Sterling gains were limited, and this pessimism is reflected in speculative positioning for the currency.
Swiss Franc (CHF) Flat on EU Recovery Fund and Vaccine Hopes
Meanwhile, today’s jump in risk appetite weighed on the safe-haven Swiss Franc, and offered riskier assets such as GBP support.
The massive stimulus recovery plan from the European Union boosted risk appetite. It offered coronavirus-hit economies in the bloc support, and the deal compromises on concerns northern states had about handouts.
This was labelled as a significant signal of unity from Europe’s leaders and sets up a foundation for the EU to recover from the crisis.
EU Summit chairman Charles Michel said it was a ‘pivotal moment’ for Europe and added:
‘This agreement sends a concrete signal that Europe is a force for action.’
According to ING analysts:
‘The mix of the agreement on the EU recovery fund (and the EU budget) and the news on progress on a Covid 19 vaccine in Oxford University testing should keep the risk environment supported today.’
However, the rise in risk appetite did not do enough to boost GBP/CHF, as the exchange rate remained flat.
The Franc was offered some support after the country’s trade surplus widened to 2.8 billion Franc, as both imports and exports increased in June.
Pound Swiss Franc Outlook: Will Risk Appetite Boost GBP?
Looking ahead, the Pound (GBP) could continue to rise against the Swiss Franc (CHF) as risk appetite increases further.
If markets remain optimistic the global economy will rebound quickly from the coronavirus crisis it will boost Sterling.
Added to this, if there are further reports of successful coronavirus vaccine trials, it will send traders flocking to riskier assets. This will weigh on the safe-haven Swiss Franc and send the Pound Sterling Swiss Franc (GBP/CHF) exchange rate higher.