GBP/CHF Exchange Rate Falls as Fitch Ratings Confirm ‘AAA’ Status of Swiss Franc
The Pound to Swiss Franc (GBP/CHF) exchange rate fell by -0.4% today, with the pairing currently fluctuating around 1.17Fr.
The Swiss Franc (CHF) headed higher against the Pound (GBP) today following the release of the final Swiss Producer and Import Prices figure for June. The month-on-month gauge beat forecasts and rose from -0.5% to 0.5% buoying confidence in Switzerland’s economic recovery.
Meanwhile, the Swiss National Bank (SNB) recently announced that it would step-up its liquidity efforts. As a result, CHF investors are becoming more jittery over the prospect of the bank holding negative rates.
The SNB said in its statement:
‘As before, the special rate will be calculated as the SNB policy rate plus a surcharge of 50 basis point. However, the lower limit for the special rate is to be reduced to at least 0%, down from the current level of at least 0.5%.’
Fitch Ratings have also confirmed that Switzerland’s Long-Term Foreign Currency (LFTC) Issuer Default Rating had remained at ‘AAA’, confirming the nation’s relatively stable economic outlook.
Consequently, the CHF continues to benefit from safe-haven demand as investors become more concerned for the global economy’s recovery.
Swiss Franc (CHF) investors will be awaiting today’s speech from the SNB’s Chairman Thomas J. Jordan. Any further dovishness about the Swiss economic recovery would prove CHF-negative.
Pound (GBP) Falls as UK Economic Recovery Hopes Compromised by Weak GDP Data
The Pound (GBP) suffered today after hopes for a V-shaped economic recovery were dashed following the release of May’s UK GDP growth figure, which fell below forecasts at 1.8%.
Ian Stewart, chief economist at Deloitte, commented on the data:
‘The bounce-back from COVID-19 has got off to a disappointing start. The pace of activity will have picked up sharply in June as the easing of the lockdown got underway. The chances of a quick return to normal, of the famed V-shaped recovery, are falling.’
‘It is likely to take years, not months, to repair the damage to the economy done by COVID-19.’
Chancellor Rishi Sunak also underlined today’s GDP figures as representing the ‘challenge we face’. Consequently, GBP investors have become more skittish as Britain’s economic recovery shows no clear signs of speeding up.
Today also saw the UK’s Manufacturing Production figure for May beat forecasts and rise from -24.4% to 8.4%. As a result, Sterling traders are becoming more optimistic that the nation’s manufacturing sector could be on the road to recovery.
GBP/CHF Outlook: Could Rising UK Inflation Data Boost Sterling This Week?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the final CPI figure for June. Any improvement in the UK’s inflation data could buoy the GBP/CHF exchange rate.
Tomorrow will also see the Bank of England’s Silvana Tenreyro, a member of the Monetary Policy Committee, deliver a speech. If the bank reiterates its downbeat outlook for the British economy, we could see Sterling suffer.
The GBP/CHF exchange rate will continue to be driven by risk-sentiment this week. If markets become more anxious over the prospect of a second wave of Covid-19, then we could see the Swiss Franc shed some of its gains.
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