Pound Sterling Swiss Franc (GBP/CHF) Exchange Rate Fails to Capitalise on Signs of UK Housing Market Improvement
The latest RICS house price balance failed to shore up the Pound Sterling to Swiss Franc (GBP/CHF) exchange rate this morning, in spite of a surprise improvement on the month.
Although the index picked up from -22 to -10 in May, suggesting that the housing market is recovering some of its lost momentum, the mood towards Pound Sterling (GBP) remained bearish.
Uncertainty surrounding Brexit continues to cast a shadow over the UK economy, especially after the defeat of Labour’s cross-party motion attempting to rule out a no-deal scenario.
With voting underway in the first round of the Conservative leadership contest investors saw little reason to favour the Pound over its rivals today, remaining wary of domestic political developments.
Steady SNB Rates Keep Swiss Franc (CHF) Exchange Rates on Stronger Footing
Swiss Franc (CHF) exchange rate movement was limited as markets were unsurprised as the Swiss National Bank (SNB) left interest rates on hold once again at its June policy meeting.
With global interest rates looking set to shift lower in the months ahead SNB policymakers lack incentive to adopt a more hawkish policy outlook, particularly in the face of the Swiss Franc’s (CHF) continued strength.
As market risk aversion remains elevated thanks to US trade policies and the risk of a global growth slowdown CHF exchange rates still appear biased to the upside.
Even though investors expect the SNB to keep interest rates at their current negative value for some months, or even years, to come this was not enough to dent demand for the Swiss Franc, however.
Market Risk Aversion Limits Swiss Franc (CHF) Exchange Rate Downside
Until investors see incentive to pile back into higher-yielding assets once again the appeal of the Swiss Franc (CHF) is unlikely to diminish.
Any fresh escalation in the long-running trade dispute between the US and China could see CHF exchange rates extending their recent gains further.
Some weakness may be in store for Swiss Franc exchange rates on the back of the SNB’s quarterly bulletin on Wednesday, however.
If the central bank sends a sufficiently dovish signal this could temper demand for the Franc in the short term, providing that markets do not see another flight to safe-haven currencies in the meantime.
Signs of BoE Optimism to Offer Pound Sterling (GBP) Support
Comments from Bank of England (BoE) Governor Mark Carney could offer the GBP/CHF exchange rate cause for confidence ahead of the weekend, however.
If Carney indicates that the BoE remains on track to raise interest rates before the end of the year this could encourage Pound Sterling to trend higher across the board.
Given the general dovishness of other major central banks signs of a hawkish BoE outlook may give GBP exchange rates a strong boost.
Even so, as the Conservative leadership contest continues to unfold this is likely to remain the primary focus of investors.
As long as the odds appear to favour a hard-line Brexiteer as Theresa May’s successor the potential for any Pound Sterling to Swiss Franc (GBP/CHF) exchange rate rebound may prove distinctly limited in nature.