Disappointing Swiss Growth Leaves the Pound Swiss Franc (GBP/CHF) Exchange Rate Flat

Pound Sterling Swiss Franc (GBP/CHF) Exchange Rate Muted as Swiss GDP Falls to Seven-Year Low

The Pound Sterling Swiss Franc (GBP/CHF) exchange rate remained flat, leaving the pairing trading at around 1.2232Fr.

The Franc remained under pressure on Tuesday after data revealed that economic growth slowed to 0.3% in the final three months of 2019.

The government showed that due to lower exports and struggling industry, the economy expanded by just 0.9% in 2019.

This weighed on CHF as this was far below the country’s long term average of 1.7% and the lowest since 2012.

During the final quarter, the State Secretariat for Economic Affairs (SECO) said manufacturing remained flat and exports declined by -0.5%. This slowdown reflected difficulties in the country’s largest export market, Germany.

Although, SECO made no reference to the impact of Covid-19 on the economy.

However, on Saturday a Swiss official said he expected it to lower its economic forecast for 2020 due to the coronavirus outbreak.

Covid-19 Fears Spark Safe-Haven Demand

Coronavirus fears likely provided the safe-haven Swiss Franc with some support this week.

However, earlier hopes that central banks around the world would use fresh fiscal or monetary policy were squashed today.

The notes released ahead of today’s meeting of G7 finance ministers and central bank governors did not mention coordinated rate cuts, which dampened risk appetite.

Although this did little to stop safe-haven demand, and commenting on this, Jane Foley, currency strategist at Rabobank in London said:

‘For many investors there is the view, perhaps, that central banks can do a lot to help the symptoms of this crisis but they’re not going to entirely make it go away.

‘There is going to be uncertainty about the economic impact of this virus, and given that, there will be safe haven demand.’

Pound (GBP) Flat as Construction New Orders Jump to Four-Year High

Sterling made some gains following the release of UK construction PMI data which showed the fastest increase in output since December 2018.

The UK’s construction PMI rose from January’s 48.4 to 52.6 last month, buoying the Pound.

New orders increased at the fastest pace since December 2015 and staffing levels neared stabilization in February.

Commenting on this morning’s data, Tim Moore, Economics Director at IHS Markit said:

‘February’s survey data adds to signs that the UK construction sector has started to rebound after a downturn through the second half of last year. Growth of business activity was stronger than at any time since the end of 2018, supported by the fastest rise in new orders for just over four years. Some construction firms suggested that the recovery in output would have been even stronger had there not been disruptions on site from severe weather conditions in February.

‘While construction order books have begun to recover in the opening part of 2020, the fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects. A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector.’

Pound Swiss Franc Outlook: Strong UK Services to Buoy GBP?

Looking ahead to Wednesday, the Swiss Franc (CHF) could suffer some losses against the Pound (GBP) following the release of inflation data.

If February’s Swiss inflation rate disappoints, the Franc will slump.

Meanwhile, better than forecast UK services PMI data could provide Sterling with a boost.

If the British services sector expands, showing the sector is showing further signs of recovery after the UK election, the Pound Swiss Franc (GBP/CHF) exchange rate will rise.

Millie Empson

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