Pound Sterling to Swiss Franc (GBP/CHF) Exchange Rate Benefits from Fading Safe Haven Demand

Pound to Swiss Franc Exchange Rate Surges on Brexit Speculation and Rising Risk-Sentiment

After not seeing much movement in the first half of the week, the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate took off like a rocket yesterday in reaction to the latest Brexit reports.

GBP/CHF opened this week near its lowest levels since the beginning of October. From the beginning of the week though, GBP/CHF has surged by around two Rappen. GBP/CHF is currently trending near its best levels in a fortnight.

Yesterday, a report in The Times newspaper claimed that the UK and EU were closing in on a deal for financial services, which would allow the UK to maintain financial service links with the EU. This made the Pound (GBP) more appealing.

Meanwhile, investors sold off the safe haven Swiss Franc (CHF) as they became less hesitant to take risks again.

Risk-sentiment has been falling due to numerous factors since the beginning of the month, including signs that the US and China trade spat is beginning to ease.

Pound (GBP) Exchange Rates Rebound from Lows on Hopes of Brexit Deal

Investors have been pouring into the Pound (GBP) since Wednesday evening, as fresh reports caused hopes that the UK and EU were getting closer to reaching some kind of soft Brexit deal.

On Wednesday, UK Brexit Secretary Dominic Raab indicated he expected a deal would be completed by late-November.

However, while his comments were played down by EU diplomats, a separate report emerged on Thursday claiming that the UK and EU had reached some tentative agreements on a post-Brexit financial services deal.

Since the Brexit process began, markets had been concerned that the City of London would lose access to the EU. According to Ulrich Leuchtmann from Commerzbank:

‘This is a significant development for the Pound as it alleviates some market concerns on how would London finance its big current account deficit.’

Sterling’s strength was limited somewhat by a disappointing UK manufacturing PMI on Thursday, but a hawkish tone from the Bank of England (BoE) gave the British currency further support towards the end of the day.

Swiss Franc (CHF) Exchange Rates Slump as Safe Haven Demand Fades

A combination of underwhelming Swiss ecostats and rising market appetite for risk left the Swiss Franc (CHF) looking unappealing towards the end of the week.

As the global stock market selloff cooled and then reversed, risk aversion was soon forgotten.

On top of this, signs that the US and China were looking to conduct more trade negotiations made investors even more willing to take risks again.

As a safe haven currency, the Swiss Franc suffered as investors rushed towards riskier assets.

The latest Swiss data further pressured CHF and made it easier for the Pound to Swiss Franc exchange rate to hold onto gains.

Friday’s Switzerland retail sales results from September saw a notable contraction, slumping to -1.6% month-on-month and a concerning -2.7% year-on-year.

Pound to Swiss Franc (GBP/CHF) Exchange Rate Outlook: Investors Anticipate Brexit Developments

The Pound to Swiss Franc (GBP/CHF) exchange rate saw major gains over the last week but as Brexit uncertainties remain, the potential for further gains is still limited.

Investors are unlikely to keep buying into the Pound (GBP) without good reason, and any developments in Brexit negotiations, especially as November gets underway, will be scrutinised closely.

UK and EU officials have indicated that if a deal is not reached by the end of the month, the need for ‘no-deal’ preparations will become more urgent.

Any signs of a deal by the middle of the month could cause another surge in Pound demand.

Next week’s UK data, which includes services PMI data and Gross Domestic Product (GDP) growth projections, are unlikely to cause a notable shift in Pound appetite unless there are any big surprises.

As for the Swiss Franc (CHF), the most notable Swiss dataset due for publication in the next week will be October’s unemployment rate report, due on Thursday.

Of course, any further shifts in global risk-sentiment caused by US-China trade developments could also influence GBP/CHF movement in the coming week.

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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

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