GBP CHF Down before Article 50 Activation

The Pound has dipped against the Swiss Franc this week but this may prove to be the calm before the storm. Looking ahead, the coming week could bring a trio of Pound-damaging developments.

The Franc’s weekly rise against the Pound has come from a cluster of positive Swiss data releases, which have all raised expectations for the Swiss economy. Over the past five days the GBP/CHF exchange rate has lost a cent.

Spring Budget sees Sterling Weakened on National Insurance Objection

The big UK news of the week, the Spring Budget announcement, has left a bit of a black cloud around GBP as investors struggle to calculate how proposals will impact the UK economy in the future.

The main focus has been on a plan to raise national insurance taxes for the self-employed, something previously ruled out in the 2015 Conservative manifesto.

Such has been the furore that the measure will not be implemented until the Autumn and may take a different form even then. Also damaging the budget’s credibility (and the Pound) was the lack of focus on Brexit, which seemed an ‘elephant in the room’ moment for many economists.

Hat-trick of Swiss Economic Data Firmed CHF GBP

While the Pound has struggled under budget concerns this week, the Swiss Franc has conversely been aided by domestic data.

As well as reserves of foreign currencies rising in February, inflation has also climbed on the the month and unemployment has dipped from 3.7% to 3.6%.

GBP/CHF Exchange Rate Forecast

Next week, Pound/Swiss Franc exchange rate movement may occur as a result of UK jobs data on Wednesday, along with the Bank of England (BoE) interest rate decision on Thursday.

The jobs stats will detail the unemployment rate as well as average earnings. As UK inflation is currently a pressing issue, rising wage growth could boost Pound demand as it will indicate that consumers may cope better with higher prices.

As with their previous meeting, the BoE is not expected to change interest rates or quantitative easing on Thursday. The Pound may still rise, however, if BoE Governor Mark Carney is on hand with a positive outlook for the UK economy as Brexit talks approach.

Another major UK event that might take place next week will be the Article 50 trigger, which is predicted to come on Wednesday or possibly even Tuesday.

This will entail Prime Minister Theresa May formally starting the process to leave the EU, which is expected to cause a sharp and potentially lengthy decline in the Pound Swiss Franc exchange rate.

The only big piece of Swiss news next week will be Thursday’s Swiss National Bank (SNB) interest rate decision, with the rate forecast to remain unchanged at -0.75%.

Elsewhere, gold price fluctuations could cause additional CHF movement, given the importance of the precious metal to the Swiss economy.

Oliver Meredew

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