The British pound to Swiss franc currency pair continues to be driven by two major factors: Brexit uncertainty which results in sterling weakness, and the global economic slowdown which pushes the Swiss franc higher.
On Tuesday, August 12, pound sterling recovered a bit from the previous week’s lows, caused by the United Kingdom’s Q2 2019 growth report — the figures have shown that the British economy shrank for the first time since 2012.
The pound’s recent swing against the Swiss franc happened as the global risk trends have shifted against the CHF as a safe-haven currency. Still, the GBP/CHF pair has been bouncing around its 2016 lows, and analysts believe the established downtrend is likely to continue.
The Swiss franc keeps its status as one of the world’s top safe-haven currencies. In times of global economic and political tensions, its price tends to considerably strengthen.
In the meantime, Brexit is dominating as a key driver of the GBP price’s movement. Amidst the fears of the UK leaving the European Union without a favourable trade deal, any news on how Brexit will actually go may have significant implications for the GBP/CHF exchange rate.
Brexit is not the only factor affecting the pair’s behaviour. Last week, the U.S.-China trade war became the #1 headline, significantly affecting the global Forex market in general, and the GBP/CHF outlook in particular.
On May 17, the U.S. government announced a list of Chinese imports which it planned to subject to an additional 10% tariff. On August 13, the U.S. Trade Representative office removed a number of goods from the list and postponed the implementation of tariffs on the remaining ones until December 15.
From the markets’ perspective, this could be read as a pause in the U.S.-China trade war. Such temporary relief is beneficial to the stock markets, but newfound stability also negatively impacts safe-haven currencies, such as the Swiss franc and the Japanese yen.
One of the main drivers of the CHF price is the global investor risk appetite, as the Swiss franc is a powerful safe-haven currency. It goes up when investors become fearful and falls when they are confident.
The National Bank of Sweden (SNB) — another key driver of the CHF’s price — has already expressed some signs of intervening in the franc’s exchange rate by trying to weaken the currency artificially. Specifically, the bank is increasing its reserves of other currencies in a bid to lower the Swiss franc.
GBP/CHF analysis and sentiment
At the moment of writing, the GBP vs CHF exchange rate is quoted at 1.18327, down from 1.18687 the day before. Analysts believe that the pound will likely experience further losses against the Swiss currency.
The pair has broken down of its 2016 lows, which is a sign of a bearish market outlook. The broader GBP/CHF trend is expected to continue falling down to 1.1500, probably followed by a retrace towards 1.1250.
What you need to know about GBP/CHF investing
All-in-all, the British pound vs. Swiss franc is considered one of the world's most popular and widely-traded cross pairs, after the major USD-based FX pairs.
The pound sterling is considered as one of the key reserve currencies and represents the largest global financial centre. The Swiss franc, in turn, is a safe-haven currency that is used around the world and is ranked alternatively as 5th or 6th in value, held as reserves after the USD, EUR, JPY, GBP and CAD.
The pair is very sensitive to global political news and economic indicators. Typically, the pair is driven by the headlines from Great Britain and Switzerland, such as interest rate changes, GDP dynamics, labour market, inflation rate, etc.
However, the fundamental analysis shows that both currencies are also influenced by the U.S. indicators and the U.S. dollar price. It is also believed that the GBP/CHF FX currency pair moves together with EUR/CHF, therefore sometimes you can observe similar extremes.
Why GBP/CHF is so attractive to Forex traders?
If you prefer to avoid trading USD pairs, GBP and CHF may be an attractive alternative. One of the major advantages of the GBP pairs is that they almost never stagnate. Therefore, you can trade with or against the trend most of the time – which makes a natural environment for making a profit. The CHF is considered to be the most news-resistant currency, which makes it more predictable in the long run.