Over the past seven days, the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate was trending within the range of 1.4140 to 1.4557.
Swiss Franc Softened Last Week after Disappointing Domestic Ecostats
Since the turn of the year the Swiss Franc has generally appreciated versus most of its major peers despite losing its safe-haven credentials. This was evidenced by the fact that low-risk assets trended higher in response to China’s market turmoil, but the Franc appreciation was much slower and more in line with tracking Euro gains. The Franc advanced versus its riskier rivals in response to Euro strength and intensifying speculation that the European Central Bank (ECB) will look to expand its quantitative easing program. Last week saw CHF gains tempered however as a result of less-than-ideal domestic data. December’s Producer and Import Prices contracted by -5.5% on the year, with December’s monthly reading unexpectedly contracting by -0.4%. In addition, January’s ZEW Economic Sentiment Index came in at -3, well below the previous score of 16.6.
British Pound Advanced as UK Inflation Rose and Unemployment Fell
Whilst the British Pound has been one of the poorest performing assets since the turn of the year, last week saw Sterling recover some of its losses thanks to positive UK reports. Tuesday saw the best British consumer price data for eleven months, Wednesday’s data revealed the lowest UK unemployment level for nine years and on Friday British car production figures hit a 10-year high and UK public finances improved significantly. However, most economists still don’t feel that Chancellor George Osborne will meet budget targets despite better-than-expected public sector data.
UK GDP to Provoke GBP/CHF Volatility
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate was trending within a tight range during Monday’s European session. This is mostly due to heightened demand for safe-haven assets, with both the Franc and the Pound considered high risk in the current global economic environment. Whilst British economic data produced mostly disappointing results, with CBI Trends Total Orders and CBI Business Optimism both declining in January, potential losses were offset by surging British stock prices. The Swiss Franc is likely to hold steady as speculation regarding additional ECB stimulus measures has propped up the ‘Swissie’ (CHF) today.
Over the coming week there will be a number of data publications with the potential to provoke changes for the Pound to Franc exchange rate. Perhaps the most significant of which will be Thursday’s British fourth-quarter Gross Domestic Product. Whilst there will be several Swiss data releases this week, Franc traders will be closely watching German inflation data due for publication on Thursday. Should inflation in the currency bloc’s most influential nation prove disappointing, the chances that the ECB will look to expand QE will be supportive of CHF demand.