GBPCHF – The Brexit barometer

Sterling strengthens against CHF

GBPCHF hits 2018 low on no-deal Brexit fears

The Swiss Franc has been in the ascendancy against Sterling as fears over a hard Brexit increase. The Pound has been taking a real battering this week as investors sell off the Pound to find more stable shores. GBPCHF is an excellent barometer of Brexit confidence and the fact it is at the lowest point of the year reflects the recent slump in confidence relating to the lack of coherent plans over the UK’s departure from the EU.

As a safe haven currency the Swiss Franc will generally rise in value in times of increased political and economic uncertainty. The Swiss currency is seen as a very reliable store of value from an investors point of view, despite having negative interest rates. This is because the SNB, Swiss National Bank and the country itself is seen as very reliable in financial matters.

Markets like certainty

The SNB exercises a huge amount of control in the currency markets too having previously intervened to weaken the Franc. The SNB holds huge foreign currency reserves and in Q2 made 11 bn CHF in profits. This is a great example of the kind of financial stability that makes Switzerland and the Swiss Franc such an attractive currency.

What better example of political uncertainty at present than the Brexit? This is why GBPCHF is the Brexit barometer as when confidence in Brexit is low the Franc will appreciate and sterling falls. When Brexit confidence is high the Franc weakens and of course Sterling will rise.

GBPCHF – The Brexit Barometer 

GBPCHF has traded as high as 1.45 in the month ahead of Brexit, by 24th June 2016 it had slipped to 1.32 on growing fears of a Leave vote, then hit the post Brexit low of 1.19 in October 2016.

Brexit is a major concern for financial markets and with no clear path to a solution, the market seems likely to continue to punish the pound and find comfort in the stability of the Franc.

If you wish to determine the overall confidence financial markets have in Brexit, look no further than the GBPCHF exchange rate, the Brexit barometer.

To discuss this post further please contact the author Jonathan Watson on jmw@currencies.co.uk.