Swiss Franc (CHF) Exchange Rates Slip as Latest Ecostats Show Contractions
Concerns over Switzerland’s economic outlook have risen today, as the latest notable economic data was more bearish than economists expected.
March’s retail sales stats, and SVME’s Swiss manufacturing PMI from April, all came in with disappointing figures.
While the previous monthly retail sales stat was revised higher, to 0.5%, March’s saw a contraction of -0.2%.
Similarly, the previous yearly figure was revised from -0.2% to a stagnant 0.0%, but March’s result printed at a concerning -0.7% rather than the expected -0.4%.
Switzerland’s manufacturing PMI also unexpectedly entered contraction in April, falling to 48.5 rather than edging higher to the expected 50.5.
These stats kept investors anxious that the Swiss National Bank (SNB) could still introduce further easing into monetary policy if the economic outlook does not improve.
Pound to Swiss Franc Exchange Rate Climbs as Franc Weighed by Poor Swiss Data
For most of the past week, investors have been buying the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate on the backs of hopes that the Brexit process could end with a softer Brexit. However, investors sold the Swiss Franc (CHF) after weak Swiss data.
Since opening this week at the interbank level of 1.31, GBP/CHF has been trending with an upside bias.
GBP/CHF saw a jump in demand on Tuesday, and this morning the pair’s interbank level was closer to 1.33, the best level for the pair since March.
Hopes that the UK government could reach a compromised Brexit deal with the opposition Labour Party have driven Pound movement.
However, if Brexit speculation becomes more bearish before the end of the week the pair could still shed some of its gains.
Pound (GBP) Exchange Rates Hold Firm on Hopes of Brexit Progress
Near the beginning of the week, investors poured funds into the Pound (GBP) on speculation that Brexit talks between the UK government and opposition Labour Party were becoming more positive.
Despite a lack of solid confirmed developments, and concerns that EU elections this month could cause additional uncertainty in politics, the Pound has sustained most of this gains this week.
Signals that the government and Labour Party are becoming more willing to reach a compromise rose yesterday, when Prime Minister Theresa May played up the common ground between parties.
In fresh comments to a parliamentary committee, she said:
‘There is a greater commonality in terms of some of the benefits of a customs union that we’ve already identified between ourselves and the official opposition,
Looking at the balance of these issues is part of the discussion. Can we come to an agreement on that? I hope we will be able to.’
The latest UK data, which showed manufacturing and construction beating expectations slightly in April, offered the Pound some additional support and made it easier for the British currency to hold its ground.
Pound to Swiss Franc (GBP/CHF) Exchange Rate Investors Anticipate Brexit News and Swiss Inflation
While it certainly seems like the Pound to Swiss Franc (GBP/CHF) exchange rate is on track for solid gains this week, there is still time for the pair to tumble if there is any surprising news tomorrow.
For example, if UK officials become more doubtful about the chances of a Brexit compromise being reached, the Pound (GBP) could lose many of the gains it has seen over the last week.
However, even if the Brexit outlook becomes a little gloomier again, GBP/CHF may not fall that much if the Swiss Franc (CHF) remains unappealing.
Swiss Franc investors are anticipating tomorrow’s consumer confidence report for Q2, as well as April’s key inflation rate reports. If inflation slows too much, investors may become even more bearish about Swiss National Bank monetary policy.
Looking ahead to next week, the Pound to Swiss Franc (GBP/CHF) exchange rate will remain influenced by Brexit news, as well as Wednesday’s upcoming Swiss unemployment rate report.