The Pound to Swiss Franc exchange rate hit its best levels of 2017 this week after UK Prime Minister Theresa May announced that Britain’s next general election would take place on the 8th of June.
GBP CHF had already been on a winning streak, but hopes of further political stability in the UK saw the pair surge from this week’s opening levels of 1.25 to 1.27. GBP CHF even briefly hit a 2017 high of 1.28 on Wednesday.
Investors took profit from the Pound’s highs, causing the British currency to slip slightly on Thursday. GBP CHF still looked on track to sustain considerable gains this week however.
The primary reason for Sterling’s strength this week has been the announcement of a UK general election. This has boosted GBP to its best levels in months despite a lack of fresh supportive UK data.
As UK Prime Minister May was unelected when she succeeded David Cameron in the role last year, her opponents have frequently brought up her lack of a public mandate.
Now that the Brexit process is formally underway, May seeks a formal public mandate and also hopes to increase the Conservative party’s majority in Parliament.
Analysts have speculated that due to poor polling data for the major opposition party, Labour, the Conservatives are likely to see a much greater majority which should help May to more smoothly push through her Brexit plans.
This has caused market expectations for long-term UK stability and certainty to soar. As a result, the Pound outlook has improved significantly this week.
Despite high demand for ‘safe haven’ assets in recent weeks as well as strong gold prices, the ‘safe haven’ Swiss Franc has seen mixed movement.
A lack of strong supportive data from Switzerland has limited the Franc’s strength.
Investors seeking out safer assets have also been favouring secure government bonds, priced in GBP. Improving UK forecasts coupled with a cheap Pound have made GBP-correlated assets more appealing again.
The long-term Pound outlook could be slightly affected by Friday’s UK retail sales data from March. Analysts have recently ramped up speculation that Britain’s growth could slow as rising inflation and slowing wage growth impact consumer activity.
The Pound to Swiss Franc exchange rate will fall slightly if Britain’s retail sales data disappoints, but is unlikely to reverse all of this week’s gains.
Regardless of the retail sales results, the Pound outlook is significantly brighter in the mid-term because of this week’s election news.
At the time of writing this article, the Pound to Swiss Franc exchange rate trended in the region of 1.27. The Swiss Franc to Pound exchange rate traded at around 0.78.