Higher-than-Forecast Swiss Unemployment Fails to Boost Pound Swiss Franc Exchange Rate

February 8, 2021 - Written by Frank Davies

STORY LINK Higher-than-Forecast Swiss Unemployment Fails to Boost Pound Swiss Franc Exchange Rate

Pound Swiss Franc Exchange Rate Trends Lower in Spite of Rising Swiss Unemployment

A higher-than-expected Swiss unemployment rate was not enough to shore up the Pound to Swiss Franc (GBP/CHF) exchange rate on Monday morning.

Although Swiss unemployment rose from 3.5% to 3.7% in January this failed to put any particular pressure on CHF exchange rates at this stage.

Instead, the Franc found support in the face of the latest bout of market risk aversion and pandemic jitters.

With markets still anxious over the health of the global economic outlook the appeal of the safe-haven Swiss Franc generally improved, keeping the GBP/CHF exchange rate on the back foot at the start of the week.

The fading impact of last week’s Bank of England (BoE) policy announcement also left the Pound exposed to weakness, with investors having now priced in the reduced odds of negative interest rates.

Swiss Franc Looks for Further Support on Weakening Chinese Inflation

Demand for the Swiss Franc could pick up further on Wednesday in the wake of the latest Chinese inflation data.

Evidence that inflationary pressure within the world’s second-largest economy faltered at the start of the year could fuel a fresh bout of market risk aversion.

Any fresh deterioration in investor confidence looks set to shore up CHF exchange rates as safe-haven demand increases.

On the other hand, if inflation surprises to the upside this could see investors returning to a more bullish outlook.

As long as the Chinese economy shows signs of holding up in the face of ongoing Covid-19 disruption worries over the wider global outlook are likely to ease, at least temporarily.

Growing anticipation ahead of the release of Friday’s Swiss inflation data may also put a dampener on the Swiss Franc, offering the GBP/CHF exchange rate a potential lift.

BoE Governor Comments Set to Stir GBP/CHF Exchange Rate Volatility

Comments from BoE Governor Andrew Bailey could offer the Pound further support on Wednesday evening.

If Bailey offers fresh evidence of a less dovish BoE policy outlook this may give GBP exchange rates a solid boost across the board.

Fresh reason to bet against the possibility of any imminent monetary loosening measures could see the Pound trending higher against its rivals.

However, if Bailey expresses any renewed anxiety over the health of the economic outlook this may still leave the GBP/CHF exchange rate on the back foot.

As long as the risk of a weaker first quarter gross domestic product performance remains the appeal of the Pound is likely to prove rather muted in nature.

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TAGS: Pound Swiss Franc Forecasts