The Pound recorded heavy losses against the Swiss Franc during Tuesday’s trading session owing to a negative reaction to the UK’s inflation results for August.
Demand for the Franc had previously been weak on account of the cost of gold diving and domestic price data providing cause for concern.
Over the previous week, the Pound hit a high of 1.31 against the Franc before falling to a low in the region of 1.28.
Pound Dips on UK August Inflation Shortfall
The Pound recorded substantial losses over the course of Tuesday’s European trading session, with a number of declines exceeding -1.1%.
Against the Franc, the Pound dropped to 1.28, equivalent to a -1% decline in the GBP CHF exchange rate.
This abandoning of the Pound by investors was largely due to the UK’s August inflation results.
The results were broadly positive on the month and year, showing a respective rise from -0.1% to 0.3% and a reprint at 0.6%.
Both of these results missed forecasts, however, which led to the conclusion that the Bank of England (BoE) will have little reason to positively alter borrowing costs in the near future.
Swiss Franc Softened by Falling Gold Prices
Aside from advancing strongly against the weakened Pound, the Swiss Franc has so far failed to make any real positive movement of its own volition, having been held back by sharply falling gold costs and the news that producer and import prices on the year and month in August have printed negatively for the second month in a row.
While this news does mean that importing goods into the country is cheaper, it also means that prices for domestic products sold is lower, thereby making increasing inflation a slim possibility.
GBP/CHF Exchange Rate Forecast
For the rest of the current week, Pound/Swiss Franc exchange rate movement may occur as a result of Wednesday’s UK jobs stats and Swiss sentiment index for September, as well as Thursday’s UK and Swiss central bank interest rate decisions.
The UK’s jobs data will focus on claimant counts in August, as well as the unemployment rate and levels of earnings in July. Claims are predicted to fall, unemployment has a rise from 4.9% to 5% on the cards and earnings, both with and without bonuses, are predicted to slip.
For Wednesday’s Swiss ZEW economic sentiment index covering September, a rise from -2.8 to 5.1 is forecast.
Thursday will notably bring both the Bank of England (BoE) and Swiss National Bank (SNB) interest rate decisions for September, though both are forecast to freeze their current rates at 0.25% and -0.75% respectively.