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GBP/CHF Exchange Rate Forecast to Soften on Safe-Haven Demand

Swiss Franc Currency Forecast
  • Political Uncertainty Continues to Weigh on GBP
  • Swiss Franc Gains on Safe Haven Demand
  • CHF Appreciation Slowed on ‘Panama Papers’ Uncertainty
  • GBP/CHF Exchange Rate Forecast to Hold Losses on EU Referendum Jitters

Pound Sterling (GBP) Exchange Rates Tumble on ‘Brexit’ Concerns

The most recent EU referendum opinion polls give a very slender lead to the UK remaining as part of the EU. However, this has only amplified concerns for those hoping for a far more commanding lead for the ‘In’ campaign.

As a result, Pound Sterling has declined against all of its major peers including the Euro, US Dollar and Australian Dollar.

 Responding to the most recent opinion poll, Will Dahlgreen from YouGov said; ‘Neither side has managed to stir up enough interest to break the impasse during a relative lull in media attention.’

Also weighing heavily on demand for the British Pound is continued uncertainty surrounding the UK’s steel crisis. After it emerged that Indian conglomerate Tata Steel is putting its British steelworks up for sale, concerns that UK steel manufacturing will disappear altogether has had a significantly detrimental impact on the British Pound.

Wales First Minister Carwyn Jones has urged the British Prime Minister to offer ‘substantial support’ to any potential buyers of the Tata Steel works. Jones stated that ‘Many [parts] are loss-making at the moment but we believe they can be turned around.’

Jones has stated that searching for a buyer has been productive, however. ‘Discussions have taken place with buyers – these are early days yet, but we do have something to build on even at this early stage. If the UK government needs to take over Tata’s assets in the short term to enable a sale process to take place then that’s something the UK government should consider. What’s important now is we carry on working to make sure the jobs we have in steel in Wales, and indeed the jobs in England, can be preserved for the future. Steel is a strategic industry for the UK – we can’t imagine being a major industrial economy if we don’t make our own steel.’

The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate softened by around -0.4% on Wednesday.

Swiss Franc (CHF) Exchange Rates Gain on Damp Market Sentiment

 With commodity prices remaining low, and with the ‘Panama Papers’ scandal weighing heavily on investor confidence, demand for safe-haven assets has seen the Swiss Franc climb versus a number of its major peers.

However, gains have been somewhat slowed given that several Swiss officials and banks are alleged to be involved in tax evasion connected to the Mossack Fonseca law firm.

Tidjane Thiam, CEO of Credit Suisse, has denied any involvement in wrongdoing connected to Mossack Fonseca, stating; ‘We as a company, as a bank only encourage the use of structures when there is a legitimate economic purpose. We do not condone structures for tax avoidance. Whenever there is a structure with a third party beneficiary we insist to know the identity of that beneficiary.’

‘We are not interested in funds that are untaxed or from dishonest activities,’ said UBS.

Swiss Franc overvaluation remains a significant concern for the Swiss National Bank (SNB), so the recent shift to risk-off trading will not be welcomed by Switzerland’s central bank.

The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate is currently trending in the region of 1.3497.

 Pound Sterling to Swiss Franc (GBP/CHF) Exchange Rate Forecast: Swiss Inflation to Cause Volatility

 Given the absence of further domestic data pertaining to either the UK or Switzerland, there is a high chance that the GBP/CHF exchange rate will hold losses for the remainder of Wednesday’s European and North-American session. With that said, there is a chance of market volatility if the Federal Open Market Committee (FOMC) minutes, due for publication later on Wednesday evening, present any significant surprise.

Thursday should see significant GBP/CHF exchange rate volatility with Swiss inflation data due for publication. Consumer prices in Switzerland remain well below the central bank’s target. If the data shows signs of falling inflation the Franc will likely dive in value amid concerns that the SNB will have no choice but to cut negative rates further.

In terms of British economic data, Trade Balance, Manufacturing Production and Industrial Production reports may provoke volatility. With that said, however, political developments may overshadow domestic data results.

The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate was tending within the range of 1.3439 to 1.3591 during Wednesday’s European session.

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