After rising from a fifteen-month-low at the beginning of the week, the Pound’s (GBP) rally appears to have been temporary as the increasing appeal of ‘safe-haven’ currencies bolsters the Swiss Franc (CHF).
Bank of England (BoE) Decision Unable to Inspire Sterling (GBP)
The GBP/CHF pair sat at its lowest point since January 2015 just last week –1.3432. Since then, the Pound has attempted a rally and has been able to maintain a lot of its gains, leaving GBP/CHF well up on those levels.
While the pairing lost around -0.2% during Thursday’s session, it currently trends in the region of 1.3688 and has gained over 180 pips throughout the week so far.
Sterling’s advance is due to a number of factors. First and most considerably, Britain’s House of Commons reconvened on Monday to discuss ongoing domestic issues after a long break. GBP also experienced buoyancy when a large, struggling UK steel plant was bought, securing over 4,000 jobs.
On Tuesday, further gains were sustained after the British Consumer Price Index (CPI) printed bullishly, scoring 0.5% despite predictions of 0.4%. This and a less appealing Euro (EUR) also bolstered the Pound on Wednesday.
Unfortunately, worsening RICS house price balance data, dropping from 50% to 42%, saw the Pound weakening on Thursday and unexciting Bank of England (BoE) news was unable to restore confidence.
The central bank confirmed they would keep the nation’s benchmark interest rate at 0.50%, citing ‘Brexit’ fears as having a genuine effect on the economy.
‘Safe-Haven’ Swiss Franc (CHF) Sees Increased Demand Despite SNB Dovishness
Part of the reason for the Pound’s rally against the sturdy Franc was the weakening appeal of ‘safe-haven’ currencies in the first half of the week, as bullish commodity news and a dovish Federal Reserve sent investors towards riskier currencies.
Investors may have also been deterred by commentary from the Swiss National Bank (SNB) regarding low Swiss inflation and negative interest rates remaining an important part of the Bank’s policy.
SNB Policymaker Andrea Maechler claimed today that the -0.75% rate is a necessity,
Bloomberg reports
. Despite this, Pound softness has seen the Swiss Franc reclaim some of its losses.
Optimistic Swiss data from this morning may have played a part, as March’s producer and import prices were up. The month-on-month figure escaped contraction, with a 0.0% score despite forecasts of -0.2%. The year-on-year figure, on the other hand, worsened from -4.6% to -4.7% but beat forecasts of -5.0%.
Forecast: Could SNB Warnings Weigh on GBP/CHF Going Forward?
Domestic data for the remainder of the week is unlikely to result in considerable GBP/CHF exchange rate shifts, as Friday only sees the release of low volatility UK construction output data.
The GBP/CHF pair has ranged from 1.3432 to 1.3741 over the last week and seems likely to end the week close to 1.3690, higher than the week’s opening levels.