UK Faces Mass Article 50 Debate, Pound Swiss Franc Exchange Rate Slides

The GBP/CHF experienced limited volatility today as investors remained focused on the UK’s Brexit plans.

The Franc firmed slightly on the back of commodities news today, although future gains are largely dependent on positive gold news.

Last week, the Pound rose from a starting rate of 1.24 on Monday to a high of 1.26 before easing slightly ahead of the weekend.

Pound Sterling Instability Follows Mass Commons Debate on Brexit

The Pound has fallen against the Swiss Franc during trading today owing to a lack of confidence in the future of the UK economy after Brexit begins.

MPs have been debating the Article 50 bill, which must be approved before the Government can trigger Article 50 and take the UK out of the EU officially.

There has been an estimate of hundreds of amendments that have been tabled to be heard, which raises the prospect of an extremely lengthy debate taking place with potentially little actual progress being made.

In addition to these amendments, there is also the matter of second readings, which might stall the process and see yet more uncertainty emerge about how the UK will leave the EU and under what terms.

Swiss Franc Boosted against the Pound by Rising Gold Prices

The cost of gold has been of benefit to the Swiss Franc today, with CHF advancing against the Pound under otherwise unfavourable conditions.

This has been limited to Monday’s KOF leading indicators figure, which has disappointed investors by showing a slide from 102.1 to 101.7 instead of the predicted rise to 103.3.

GBP/CHF Exchange Rate Forecast

For the rest of this week, Pound Sterling/Swiss Franc exchange rate movement may occur as a result of UK PMIs for January and Thursday’s Bank of England (BoE) interest rate decision press conference.

Swiss news will include a manufacturing PMI on Wednesday, as well as retail sales stats on Thursday.

For the UK, Wednesday’s manufacturing, Thursday’s construction and Friday’s services PMIs are all expected to have fallen in January, although none are forecast to fall into the sub-50 contraction range.

The BoE is predicted to leave interest rates on hold at 0.25%, but any following remarks from Governor Mark Carney could devalue the Pound if they show uncertainty about the UK’s economic future once Brexit begins in earnest.

Swiss news is due to show a manufacturing dip on Wednesday from 56 to 55.8 points, while the only retail sales forecast made so far has been for an annual slowdown from 0.9% to 0.5% in December.

As always with the Franc, the price of gold may also influence its value moving forward; given how unsettled the US Dollar has been lately, gold prices have risen and could continue to do so to the benefit of the Franc.

Oliver Meredew

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