As 2017 comes to an end, the Pound to Swiss Franc (GBP/CHF) exchange rate has risen marginally.
This limited movement has been caused by concerning forecasts for the UK economy in 2018; predictions have focused on real income movement.
Pay Squeeze Predictions: GBP/CHF Exchange Rate could Drop on Income Freeze
The Pound may be in for a difficult year of trading against the Swiss Franc, based on forecasts for the UK economy in 2018.
The Resolution Foundation, an independent UK think-tank, has estimated that UK real income growth will be flat in the coming year.
Although the group expects that inflation and wage growth levels will finally reach parity, they do not believe that this will translate into a sudden recovery in incomes.
At present, the pace of UK wage growth is under the pace of inflation, so ‘real incomes’ are progressively declining.
If inflation and wage growth equalise, this would stop the real income squeeze. Unless average earnings rise above inflation, however, UK consumers will be no better off.
This is a key issue for government and Bank of England (BoE) policymakers, along with retailers.
If real incomes aren’t increasing, consumers may be more selective in their purchases, which in turn puts pressure on the UK retailers as well as elsewhere.
Summing up the Resolution Foundation’s forecast, Director Torsten Bell said;
‘The good news is that things will get better (in 2018). [But] we may go from backwards to standing still, with a meaningful pay recovery still out of sight’.
Swiss Franc to Pound Exchange Rate could Surge on 2018 Euro Weakness
The Swiss Franc to Pound (CHF/GBP) exchange rate has fallen today, although the Franc could see itself in high demand in 2018 if the Euro drops.
This is largely dependent on stability within the overall Eurozone – previously, the Swiss Franc has been a ‘safe haven’ currency, regularly sought when the Euro has been unstable.
2017 brought a number of tests for Eurozone confidence; these included the Dutch general election, the French Presidential election and the German federal election.
The fractious German election has led to uneasy coalition talks, but even this hasn’t been a Euro-shattering worst-case outcome.
In 2018, however, the Euro could potentially rocked by an Italian general election, opening the door to a sharp Franc to Pound exchange rate rise.
In broad terms, according to QCAM Senior Economist Bernhard Eschweiler;
‘If the future of the Euro is back on the block and the Euro area is called into question, Switzerland will be back there as a safe haven’.
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