GBP/CHF Exchange Rate Forecast: UK, Swiss Consumer Prices in the Spotlight
With the trading week drawing to a close investors will soon be turning their attention to next week’s run of ecostats, particularly with both nations’ inflation readings on the market radar.
Investors will be particularly interested in the UK’s inflation results after the BoE’s recent assertion that an early rate decision would be highly dependent on the trajectory of consumer prices.
If inflation continues to remain so significantly above the bank’s target levels then a May rate hike might seem warranted – an eventuality that could cause the GBP/CHF exchange rate to rally once more.
On the Swiss front, inflation continues to remain very low and given that the SNB is expected to continue to hold steady on rate hikes it is unlikely that the reading will have much of an effect on GBP/CHF (barring a significant increase).
Brexit Transitionary Period still Precarious, Pound Exchange Rates Tumble
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate stumbled on Friday as markets reacted to a wealth of disappointing UK ecostats and slightly foreboding comments from the EU’s Chief Negotiator Michel Barnier.
On the data front, the UK’s trade deficit hit its widest point since September 2016, expanding from £-3.65b to £-4.896b year-on-year in December - significantly below the forecast of £-3.2b.
This was largely driven by an increase in the UK’s importation of oil from Europe, (with Norway supplying the bulk of these exports).
In other news the UK’s industrial production fell by -1.3% month-on-month in December, tumbling as a result of the shutdown in the Forties North Sea oil pipeline, whilst construction contracted by -0.2%.
Manufacturing production, however, printed up at 0.3%, marking its eighth consecutive month of gains.
The largest encumbrance, however, proved comments from Barnier, who insisted that a transition period after Brexit-Day 2019 is ‘not a given’.
Barnier cited ongoing disagreements between the UK and the EU regarding three central variables: The rights of EU, and UK nationals, the UK’s right to object to new EU rules, and whether the UK will continue to participate in new justice and home affairs policies during the transition period.
‘If these disagreements persist the transition is not a given’.
These comments threw into doubt the UK’s plans for a smooth landing for businesses and crippled the Pound, particularly with the Bank of England (BoE) having stated that an early rate hike would be very much dependent on success on the Brexit transition front.
Swiss Unemployment Holds Stead, Swiss Franc (CHF) Exchange Rates Bolstered
The Swiss Franc (CHF) found support in some better-than-expected unemployment figures on Friday.
The Swiss unemployment rate printed at 3.3% in January, consistent with the previous month and below the market consensus of a rise to 3.4%.
This remains the highest jobless rate since April 2017, however.
The Swiss currency has benefited somewhat from this week’s manic sell-off in equities, with many traders switching to safe-haven currencies in an attempt to protect their investments.
This has been limited, however, as banks are now touting a short position against the Franc on the understanding that the Swiss National Bank (SNB) will likely lag on their unwinding of stimulus.
This is because the central bank regards the Franc as overvalued and a threat to the nation’s exporters – a prospect that has led many to posit that they will stick to an easy-money programme for far longer than originally anticipated.