GBP/CHF Exchange Rate Falls, UK GDP Report for Q1 Hit by Biggest Contraction in 40-Years
The Pound to Swiss Franc (GBP/CHF) exchange rate fell by -0.2% today, with the pairing currently trading around 1.16fr.
Sterling struggled today following this morning’s release of the UK’s latest GDP figure for the first quarter, which fell below forecasts from -2% to -2.2%. As a result, GBP investors have become increasingly concerned for Britain’s economic recovery going forward.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, was notably gloomy in his outlook, commenting:
‘The biggest contraction for 40 years, even though Q1 contained just nine lockdown days.’
Mr Tombs also added that today’s data was ‘just the prelude’, with worse to come in the second quarter.
Meanwhile, today saw the Bank of England’s (BoE) chief economist, Andy Haldane, warn that the UK must not return to 1980s levels of unemployment. Consequently, Sterling traders are becoming jittery as the BoE continues sound dovish about the UK’s economy.
Mr Haldane commented:
‘Both the UK and the global economies are already well into the “second quarter” – the recovery phase. The UK’s recovery is more than two months old, while the global economy is perhaps three months into its recovery, in both cases from an exceptionally low starting point.’
Today also saw Prime Minister Boris Johnson vow to act fast to bolster the British economy in the wake of the coronavirus. His latest manifesto pledges to ‘level up’ the country.
However, this was not enough to boost the GBP/CHF exchange rate, as investors continue to remain wary about the second quarter growth figures.
Swiss Franc (CHF) Edges Higher as Hopes Grow for Swiss Economy
The Swiss Franc (CHF) benefited from an improving economic outlook for the Swiss economy today, after the forward-looking KOF Economic Barometer showed an uptick of 9.8 in June to 59.4.
Michael Graff, an economist at KOF, commented:
‘The uptick could have been foreseen because the lockdown is largely over, businesses are starting again, restaurants are serving again.’
‘The situation has gone from dramatically bad to slightly less dramatically bad, but is still very serious.’
In Swiss economic news, today saw the release of May’s retail sales figures for May, which edged higher from -18.8% to 6.6%.
As a result, CHF investors are feeling more optimistic about the Swiss economy’s recovery in the months ahead.
GBP/CHF Outlook: Could the Swiss Franc Edge Higher on Improving Manufacturing PMI Figures?
Swiss Franc (CHF) investors will be looking ahead to tomorrow’s Swiss Manufacturing PMI report for June. Any signs of improvement could see the Swiss Franc edge higher.
Sterling traders will be awaiting the latest UK Markit Manufacturing PMI on Wednesday. If this improves, then we could see the Pound claw back some of its losses against CHF.
The GBP/CHF exchange rate will remain sensitive to UK-EU post-Brexit negotiations this week. Any signs that these could end in a stalemate would prove GBP-negative.