Safe Haven Demand Keeping Pound Swiss Franc (GBP/CHF) Exchange Rate Kept Under Pressure

Pound Swiss Franc Exchange Rate Falling as Sterling Struggles to Gain

Investors have had little reason to buy the Pound (GBP) since markets opened this week, and the Pound Swiss Franc (GBP/CHF) exchange rate has been lower as a result. The Swiss Franc (CHF) is a safe haven currency that benefits from market uncertainty.

Since opening yesterday at the interbank level of 1.21, GBP/CHF has been trending with a downside bias.

GBP/CHF briefly recovered last night, but as of this morning was tumbling below the week’s opening levels once again. At the time of writing, GBP/CHF is trending in the interbank region of 1.20.

It follows last week’s strong rebound from over half a cent lower, in the region of 1.20.

Still, there are signs that markets have fairly bullish outlooks on the Pound. This means that gains could be ahead.

Pound (GBP) Exchange Rates Unappealing on Risk-Aversion, but Outlook Still Higher

Investors have been selling the Pound since markets opened this week. A combination of Britain’s coronavirus and Brexit issues have made the Pound less appealing as investors avoid taking risks.

Britain’s coronavirus situation has seen some slight improvement in recent sessions, but not enough to keep the Pound bullish.

What’s more, Sterling was knocked slightly by concerns over UK-EU exports, amid reports that fishery businesses were struggling with the post-Brexit UK-EU deal.

Despite this, longs on the Pound remain generally bullish. This indicates markets expect the Pound to advance in the longer term.

According to Thomas Flury and Dean Turner, Analysts at UBS:

‘The Pound is a procyclical currency, and the UK usually profits from investment inflows whenever global growth is strong. After many years of Brexit stress and an undervalued Pound this procyclicality might have an even bigger impact than normal,’

Swiss Franc (CHF) Exchange Rates Benefitting from Safe Haven Demand

The safe haven Swiss Franc has been strong this week so far, as markets are hesitant to take risks.

Worsening coronavirus infection rates across the globe have been the primary cause of this week’s ‘risk-off’ movement.

Other factors making investors hesitant to take risks this week include anxiety over the upcoming inauguration of US President-elect Joe Biden.

Biden will come into power on Wednesday. Markets are anxious about how the Biden administration could shift US stances on fiscal policies, and there is also fear of potential civil unrest around the changing of power.

Today’s Switzerland producer and import prices stats were a little better than expected. They had little notable impact on the Swiss Franc’s movement however.

Pound Swiss Franc (GBP/CHF) Exchange Rate Weakness May Be Temporary

Investors are selling the Pound to Swiss Franc exchange rate this week so far, but this movement may be temporary.

Investors have little reason to keep selling the Pound unless risk-aversion persists. While it is possible that risk-off movement will linger around the inauguration of Joe Biden as the next US President, markets will likely calm again soon.

With bets rising that the Pound is in for a recovery this year, GBP/CHF could see a strong rebound if markets become more optimistic and confident again.

Not only do markets bet the UK outlook will improve on coronavirus vaccine hopes, but the safe haven Swiss Franc will weaken if investors return to risk-taking.

Key UK data due later in the week, such as retail sales and PMI projections on Friday, could also influence the Pound Swiss Franc (GBP/CHF) exchange rate.

Josh Jeffery

Contact Josh Jeffery


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