Unexpected Slump in UK Retail Sales Leaves Pound Swiss Franc (GBP/CHF) Exchange Rate Muted

Pound Sterling Swiss Franc (GBP/CHF) Exchange Rate Flat as UK Hit by Overall Weak Growth

The Pound Sterling Swiss Franc (GBP/CHF) exchange rate remained muted, leaving the pairing trading at around 1.2709Fr.

Sterling remained under pressure on Thursday as data from the Office for National Statistics (ONS) revealed UK consumers unexpectedly cut back on shopping last month.

As British consumers have helped the economy through a weak patch caused by Brexit uncertainty, October’s slump in sales added to further signs that the UK economy is suffering from overall weak economic growth.

The ONS showed sales declined by -0.1% and edged up by an annual rate of 3.1%, weaker than forecast and the slowest rate of growth in a year-and-a-half.

This likely weighed on GBP, and commenting on this, head of retail at the commercial arm of Lloyds Bank, Philipp Gutzwiller said:

‘Following recent stagnation, a further dip in performance (albeit slight) will be a major concern for the sector as it heads into the busiest trading period of the year.

‘With consumers increasingly seeking bargain prices sooner rather than later, the challenge will be pitching those big-ticket items at the right price while avoiding a race to the bottom.

‘However, this month’s fall in sales may well prove an eye opener and the stimulus retailers need to deliver a more considered approach to Christmas trading and beyond.’

Safe-Haven Swiss Franc (CHF) Muted as Risk Appetite Slumps

The safe-haven Swiss Franc received an upswing in support on Wednesday following reports that US-China trade negotiations had ‘hit a snag’ over farm purchases.

Citing sources familiar with the matter, the Wall Street Journal revealed talks stalled as Beijing expressed it did not want a one-sided deal in favour of Washington.

The report came just after US President Donald Trump’s speech in which he said a trade deal with China was ‘close’ but offered no further details, and also threatened to ‘substantially’ increase tariffs on Chinese goods.

Commenting on this, head of foreign exchange strategy for North America at BNP Paribas, Daniel Katzive noted:

‘The main thing we seem to be doing in FX today is following a bit of a risk-off tendency.

‘The thinking there is that the market had gotten priced for a pretty constructive outlook reduced recession risk, reduced trade risk and [is] now paring back some of that optimism.’

Sterling (GBP) Slumps as UK Inflation Falls to Three Year Low

The Pound was left flat against the Franc on Thursday, despite the upswing in political optimism that offset the slew of disappointing economic data.

At the start of the week, data showed the number of Britons unemployed increased, and average earnings growth disappointed.

Added to this, yesterday morning data revealed that the UK’s inflation rate dropped to a three-year low which has likely increased the pressure on the Bank of England (BoE) to make its next move a cut rather than a hike.

The pairing fell over the course of the week despite Brexit Party Leader Nigel Farage’s announcement that his party would not contest seat won by the Conservatives in the 2017 election.

The chance of Prime Minister Boris Johnson remaining in power increased, although on Wednesday Farage announced he would stand down no further party members.

Pound Swiss Franc Outlook: Will a Dovish SNB Weigh on CHF?

Looking towards the end of the week, the Swiss Franc (CHF) could edge down against the Pound (GBP) following this evening’s speech from the Swiss National Bank’s (SNB) Andréa Maechler.

If Maechler’s tone is overly dovish and she repeats Chairman Thomas Jordan’s message that negative rates are the best course of action, the Franc could edge lower.

Meanwhile, Sterling could edge up slightly if there is a fresh wave of political optimism and the likelihood of Boris Johnson remaining in power and taking the UK out of the EU by the new deadline increases.

If reports or further polls reveal the Conservative Party is likely to remain in power, the Pound Swiss Franc (GBP/CHF) exchange rate may rise.

Millie Empson

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