Sterling slides against the Swiss Franc as Brexit and the global economic outlook weigh on the Pound
The pound to Swiss franc exchange rate has fallen lower below 1.20 for the GBP vs CHF pair with interbank rates currently sitting at 1.189. The slide in the pound against the Swiss franc has presented those looking to sell Swiss francs with an opportunity to convert when compared to recent months. Brexit is one factor which is most likely putting pressure on the price of sterling, but it is also the global outlook and the uncertainty it faces which is seeing a flight to safety to the ‘safe haven’ currencies which include the Swiss franc and the US dollar. This trend looks likely to continue with no real progress in the US China trade talks to date and fears that there could be a global trade war.
Investors piling into the Swiss Franc
The Swiss economy in general has been weakening with a number of indicators showing weakness. Industry numbers for July dropped to their lowest levels in 10 years whilst manufacturing Purchasing Managers Index numbers also fell to their lowest levels since 2009. Maxime Botteron from Credit Suisse on the US China trade war stated that “This is affecting the eurozone, which is an important trade partner of Switzerland. Despite the downturn in the Swiss economy it doesn’t appear to be deterring investors from piling into the Swiss franc.”
Could the SNB intervene and why?
There have been reports emerging that the Swiss National Bank may need to intervene once again to curb demand for the Swiss Franc. The last time this happened was back in 2012 when the SNB surprised the markets when it stated it would buy unlimited amounts of foreign currency and a level was set at 1.2 against the Euro. It has been reported that foreign currency reserves have been climbing once again in Switzerland which could suggest there is some intervention beginning to happen. Maxime Botteron added “It does suggest interventions”. In recent weeks a number of the worlds major central banks have cut interest rates as seen by the US Federal Reserve, The Reserve Bank of Australia and the Reserve Bank of New Zealand. There is also a growing chance that the European Central Bank may look to cut rates as well which could persuade more investment into Switzerland away from the EU.
Brexit meanwhile continues to put pressure on GBP CHF as the odds of a no deal Brexit have increased in recent weeks after Boris Johnson took over as Prime Minister. The Bank of England Governor Mark Carney said last week that a no-deal Brexit could result in a further slide in the pound’s value as well as a shock to the economy. If you would like to learn more or having an upcoming currency transfer and would like to save money when compared to using your high street bank, feel free to contact me directly using the form below.