GBP/CHF Exchange Rate Edges Higher as Oil Prices Stabilise on US-Iran Tensions
The Pound to Swiss Franc (GBP/CHF) exchange rate rose by 0.5% today, with the pairing currently trading around 1.205Fr.
The safe-haven Swiss Franc (CHF) slipped due to an uptick in risk sentiment as Europe continues to re-open its economies, with Denmark saying that it would open primary schools on 4th May, while Italy – Europe’s most heavily hit by the coronavirus – said it would announce its lockdown exit strategy by the end of the week.
Today also saw oil prices stabilises after a two-day plummet which saw prices sink into negative territory. US crude-oil prices rose by 10% to $15.30 early into today’s European trading, while Brent crude oil advanced by 7.6%.
The rebound in oil prices owes itself to fresh US-Iran tensions sparked off by US President Donald Trump who instructed the US Navy to ‘shoot down and destroy’ any Iranian gunboats that threaten US ships.
Analysts at Rabobank commented:
‘It is perhaps the oldest Middle East oil trick in the book: you want higher oil prices, threaten to start breaking things.’
As a consequence of improving market optimism, the Swiss Franc (CHF) has suffered from a sudden drop-off of safe-haven demand.
Pound (GBP) Rises Despite Dire UK PMI Data
The Pound (GBP) rose against the weaker Swiss Franc (CHF) today despite dire flash UK PMI figures for April. Today saw the Services PMI figure plummet to a worse-than-expected 12.3, while Manufacturing also shot below even the most pessimistic forecasts at 32.9.
Chris Williamson, the Chief Business Economist at HIS Markit, commented:
‘The UK economy has been hit by the COVID-19 outbreak in April to a degree far surpassing anything seen in the PMI survey’s 22-year history. Business closures and social distancing measures have caused business activity to collapse at a rate vastly exceeding that seen even during the global financial crisis, confirming fears that GDP will slump to a degree previously thought unimaginable in the second quarter due to measures taken to contain the spread of the virus.’
Meanwhile, the Bank of England (BoE) warned of the worst contraction in centuries as the UK continues to battle the coronavirus pandemic.
Nevertheless, the Pound (GBP) has performed remarkably well against its peers as the Eurozone and the US are also suffering from similar economic fears.
GBP/CHF Forecast: Could Weak UK Retail Sales Send Sterling Plummeting?
Pound (GBP) traders will be awaiting tomorrow’s release of March’s UK Retail Sales figures. If retail sales confirm consensus and plummet by -4.7%, then we could see Sterling shed some of its gains against the Swiss Franc.
Meanwhile, the Swiss Franc will remain sensitive to risk sentiment this week. Any signs of Europe’s ongoing economic recovery, or stabilising oil prices could, therefore, further weaken CHF.
The GBP/CHF exchange rate will see a great deal of volatility this week, with UK markets focusing on economic developments both domestically and worldwide. If Britain’s economic outlook gets any darker, then we could see the Pound begin to fall.
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