GBP/CHF Exchange Rate Rangebound as Fears That UK Lockdown Could Last Until March
The Pound to Swiss Franc (GBP/CHF) exchange rate held steady today, with the pairing currently trading around 1.19fr.
Sterling struggled against many of its peers today after Prime Minister Boris Johnson announced a further national Covid-19 lockdown.
However, Cabinet Office Minister, Michael Gove, was sceptical about a mid-February easing of lockdown measures, saying:
‘We can’t predict with certainty that we’ll be able to lift restrictions the week commencing the 15 to 22 [February], what we will be doing is everything we can to make sure that as many people as possible are vaccinated so that we can begin progressively to lift restrictions.’
‘I think it’s right to say that, as we enter March, we should be able to lift some of these restrictions – but not necessarily all.’
As a result, GBP investors are concerned that an extended national lockdown could further jeopardise the nation’s economic recovery in 2021.
Meanwhile, UK Chancellor Rishi Sunak has unveiled a further £4.6 billion relief packaged for the retail and hospitality sectors.
British Chambers of Commerce director, Adam Marshall, was critical of the grant, however, saying:
‘Ministers need to set out a clear support package for the whole of 2021 – not just until Spring – to help businesses of all shapes and sizes survive this difficult and uncertain year.’
Swiss Franc (CHF) Steady as Swiss Inflation Falls Below Forecasts
The Swiss Franc (CHF) held steady against Sterling today following the release of the latest Swiss Consumer Price Index in December, which fell below forecasts by -0.1% month-on-month.
The Swiss Federal Statistical Office commented:
‘The 0.1% decrease compared with the previous month can be explained by several factors including falling prices for international package holidays. Medicines also recorded a price decrease, as did fruiting vegetables. In contrast, prices for heating oil and air transport increased.’
Today also saw a report from Procure and Credit Suisse, which indicated that the Swiss Manufacturing PMI had risen to 58.0 in December.
As a result, CHF investors are becoming more optimistic about Switzerland’s substantial manufacturing sector, which could help recover the nation’s economy in 2021.
However, some analysts have warned that the stronger Swiss Franc could cause a problem for the Swiss manufacturing sector.
Crispus Nyaga, an analyst at Invezz, commented:
‘The stronger Swiss franc poses substantial risks to the Switzerland manufacturing sector. That’s because it makes its manufactured goods more expensive than those of its competitors. Indeed, the Swiss National Bank has lamented about the stronger franc in most of its recent rate decisions.’
GBP/CHF Forecast: Could Weakening Demand for Safe-Havens Send the Swiss Franc Spiralling?
Pound (GBP) traders will be awaiting tomorrow’s publication of December’s UK Services PMI.
Any signs of the UK’s largest sector improving last month would be GBP-positive.
However, GBP investors will be monitoring Britain’s Covid-19 situation.
If this shows any signs of requiring an extended national lockdown, then we would see Sterling suffer.
The Swiss Franc (CHF) could suffer this week if risk sentiment continues to improve.
As a result, demand for the safe-haven CHF could begin to fall, weakening the CHF/GBP exchange rate.