Is Safe Haven Demand Falling? Pound to Swiss Franc (GBP/CHF) Exchange Rate Could Keep Climbing as Trade Fears Fade

Pound to Swiss Franc Exchange Rate Climbs on Risk-Sentiment despite Brexit Fears

Demand for the Pound (GBP) weakened on Wednesday, as investors became concerned that there may be no progress in Brexit negotiations this week at the summit in Salzburg. Despite this, the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate has benefitted from some improved risk-sentiment.

Since opening this week at the interbank level of SFr1.26, GBP/CHF has trended with an upside bias. On Wednesday, GBP/CHF touched on a monthly high of SFr1.27.

While GBP/CHF has been unable to hold its weekly highs, it is currently still trending in the interbank region of SFr1.27.

The primary cause of Pound to Swiss Franc gains so far this week has been lower market demand for safe haven currencies like CHF.

Pound (GBP) Exchange Rates Support Bolstered by UK Retail Sales Results

Investors have gone long on Pound Sterling (GBP) today as the latest UK ecostats came in well above market expectations.

Britain’s August retail sales stats beat expectations in every notable print, dampening concerns that UK household activity was going to tail off amid Brexit uncertainties.

August’s month-on-month retail sales figure was forecast to slump from 0.7% to a contraction of -0.2% but instead only slowed to 0.3%. Meanwhile, the yearly figure only slipped slightly from 3.5% to 3.3% rather than to the expected 2.3%.

The retail sales excluding fuel figures also beat expectations in both notable prints. The stronger retail sales came due to higher demand for non-food sales and household goods.

As a result of the retail report, the Pound was able to avoid some of this week’s Brexit volatility.

Investors have been concerned that the issue of the Irish border post-Brexit has still not been resolved, with UK Prime Minister Theresa May rejecting EU offers at alternative solutions this week.

If the UK and EU cannot reach an agreement on how to handle Ireland’s border, this could worsen the risk of negotiations collapsing, leading to a worst-case scenario ‘no-deal Brexit’.

Swiss Franc (CHF) Exchange Rates under Pressure from Swiss National Bank (SNB) Caution

After months of strong performance, investors have been selling safe haven currencies like the Swiss Franc (CHF) as fears over US trade policy fade for the time being.

This week, the US and China have both ramped up trade tariffs against one another as investors feared. However, the latest escalations between the nations were not as severe as previously hinted.

This has indicated to investors that the US and China may be more willing to hold further trade negotiations before focusing on escalating a trade war. As a result, markets have been relieved and more willing to go after yield.

CHF’s selloff accelerated this week, as the Swiss National Bank (SNB) took a cautious stance in its latest monetary policy decision.

While the bank didn’t toughen its language about the recent strength of the Swiss Franc, it did lower its inflation forecast.

Some investors took this as another sign that the bank was concerned about the value of the Franc going forwards, as a stronger Franc would lead to weaker inflation. Overall, the bank’s caution kept additional pressure on the Swiss currency.

Pound to Swiss Franc (GBP/CHF) Exchange Rate Rally Could Continue if Brexit Negotiations Improve

While the Pound to Swiss Franc (GBP/CHF) exchange rate is trending near its best levels in a month, its gains are still being limited by Brexit uncertainties.

Pound (GBP) investors are anticipating more Brexit developments as October approaches and time continues to run out on UK-EU negotiations.

UK and EU negotiators have indicated that talks will accelerate ahead of a planned November Brexit summit. However, if key issues like the Irish border remain unresolved investors will remain concerned about the possibility of a no-deal Brexit.

Of course, if there are any notable developments or agreements regarding the Irish border, the Pound could surge.

The Pound’s rally versus the Swiss Franc could easily continue, so long as market demand for safe haven currencies remains weak.

If US-China trade tensions worsen considerably however, investors could return to currencies like the Swiss Franc (CHF) and the Pound to Swiss Franc (GBP/CHF) exchange rate could struggle to hold its gains.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard