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Pound Swiss Franc Exchange Rate Sinks as Safe-Haven Demand Rises Amid US-Iran Conflict

Swiss Francs

GBP/CHF Exchange Rate Falls, Geopolitical Tensions Boost Safe-Haven Appeal of Swiss Franc

The Pound Swiss Franc (GBP/CHF) exchange rate fell today, with the pairing currently trading around 1.272CHf after the publication of the Swiss SVME PMI figure for December, which beat forecasts and rose out of contraction territory from 48.8 to 50.2.

The Swiss Franc (CHF) has also benefited from its safe-haven status today following US President Donald Trump’s ordered airstrike on a top Iranian Commander, which received a sharp rebuke from Iran’s Supreme Leader, Ali Khamenei, who vowed “severe retaliation”.

As geopolitical tensions heat up, with Washington and Tehran locked in increasing conflict, as the two nations weigh up the consequences of America’s actions in such a sensitive region.

Olivier Jakob, managing director of Petromatrix, was downbeat in his analysis, saying:

‘The killing of Soleimani calls for a serious increase of the geopolitical risk premium.

‘This was supposed to be a holiday week for many traders. Many will be cutting the holidays short and call-in for an emergency risk meeting.’

If the escalation continues, we could see the CHF/GBP exchange rate continue to benefit from a heightened market appetite for safe-haven currencies like the Swiss Franc.

GBP/CHF Exchange Rate Dips as Post-Brexit Speculations Dim

The Pound (GBP) continued to struggle today, with post-Brexit speculations over the British economy dimming ahead of the 31st January, the date the UK is expected to officially leave the European Union.

These fears for the economy were compounded by today’s release of the UK Consumer Credit figure for November, which fell to a worse-than-expected £0.563 billion.

Analysts at Reuters commented:

‘British consumers increased their borrowing in November at the slowest rate in more than five years and the construction industry’s decline worsened in December… adding to signs of an economy that stalled late last year.’

GBP/CHF Outlook: Could the Swiss Franc Continue to Rise as US-Iran Tensions Flare Up?

Looking ahead to next week, Swiss Franc traders will be awaiting Tuesday’s release of the Swiss inflation figure for December, which is expected to flatline at 0% year-on-year. However, any surprise improvement would boost the CHF/GBP exchange rate.

Meanwhile, Sterling investors will be looking to Monday’s release of the UK Markit Services PMI for December, with any signs of the index improving being Pound-positive.

US-Iran developments will continue to drive the GBP/CHF exchange rate into next week, with any signs of further flare-ups between the two nations likely bolstering safe-haven demand and boosting the Swiss Franc.