US China Trade War Fears Leave Pound Swiss Franc (GBP/CHF) Exchange Rate Volatile

Pound to Swiss Franc (GBP/CHF) Inert despite Strong Swiss Unemployment Rate

Developments in the ongoing US China trade war have been driving safe-haven currencies like the Swiss Franc (CHF) this week, but the Pound to Swiss Franc (GBP/CHF) exchange rate has seen mixed movement, boomeranging back to opening levels at the close of the week.

After opening Monday’s session at the interbank rate of 1.27, GBP/CHF fluctuated within a narrow range amid a lack of demand for either currency. At the time of writing on Friday, GBP/CHF is trending closer to the week’s opening levels.

The Pound (GBP) outlook is limited by UK election and Brexit uncertainty, but the Swiss Franc is also limited by US China trade war doubts, with rumours that a deal between the two superpowers might fail at the eleventh hour emerging from an anonymous source in the White House.

Added to this, the latest Swiss data has also failed to have any notable influence on Franc movement.

Pound (GBP) Movement Limited on BoE Split Vote

The Pound (GBP) saw limited demand throughout the week, as investors hesitated in making any big moves ahead of December’s upcoming 12th December general election.

With the election outcome difficult to call, a lack of clarity has seen markets subdued on uncertainty.

Investors have even been brushing over surprising economic news as their focus narrows on British politics.

Yesterday saw the Bank of England (BoE) surprise investors when two policymakers took an unexpectedly dovish stance and voted to cut interest rates.

The surprise division saw near-term interest rate cut bets rise. However, this ultimately had minimal impact on the Pound as the broader focus remains on politics.

Thu Lan Nguyen, FX Strategist at Commerzbank, commented:

‘It just shows that the market is largely concentrated on politics at the moment, and not on fundamentals and monetary policy,’

Swiss Franc (CHF) Firms on Trade Jitters

Earlier in the week, the safe haven Swiss Franc (CHF) tumbled as the latest US-China trade news described an encouraging outcome.

As a safe haven, the Swiss Franc is often less appealing when markets are in a risk-on mood, so hopes that the US and China might reach a consensus or that tariffs might be wound back left investors hungrier for riskier and trade-correlated currencies.

However, hopes softened yesterday as quotes from an anonymous Washington source claimed discourse between US officials was putting the deal at risk.

This saw the Swiss Franc firm slightly as markets erred toward a risk-on state.

This morning’s Swiss unemployment rate met forecasts by rising from 2.1% to 2.2%, exerting some additional pressure on CHF.

Pound Swiss Franc (GBP/CHF) Exchange Rate Outlook: Politics and Geopolitics

Despite some notable economic and central bank news in recent sessions, the Pound Swiss Franc (GBP/CHF) exchange rate remained largely focused on developments in politics and geopolitics.

A general lack of clarity over the outcome of next month’s UK General Election, with investors struggling to see a clear lead for any of the major parties, has seen a largely inert Sterling move in a limited range, while the Swiss Franc (CHF) continues to be driven by geopolitical tensions between the US and its trading partners.

Next week is likely to see these factors continue to drive GBP/CHF movement, with investors looking closely at polls and rhetoric from party leaders as they follow the campaign trail.

GBP investors largely favour a Tory majority on 12th December as this is perceived as the best way to break the Brexit deadlock in parliament, so a clear lead in polls and a strong campaign performance is likely to see Sterling rise.

Meanwhile, the Swiss Franc could be in for stronger performance if US-China trade relations deteriorate further, pushing markets into a deeper risk-off state.

Next week’s UK GDP figure is likely to be overshadowed by political developments, but investors will still take an interest in the data following yesterday’s unexpectedly dovish stance from the Bank of England, with interest rate cut bets rising if the stats fail to impress.

Ultimately, British politics and US-China trade talks will remain front and forward next week for the GBP/CHF exchange rate, with any potential gains from favourable data likely to prove limited.

Josh Jeffery

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