This Swiss Franc update examines the factors that have the potential to effect your currency exchange over the coming weeks. The below table displays the difference in CHF you would have achieved when buying £200,000 over the past month.
|Currency Pair||% Change||Difference on £200,000|
Buying the Swiss Franc over the last month has been getting more expensive, however most of this has been down to UK weakness due to the political uncertainty rather than any CHF strength.
Switzerland is a relatively small country of 8 million people however because the Swiss Franc is considered a safe haven, many people like to hold large amounts of their assets in Swiss francs. This demand for their currency helps Swiss businesses and citizens internationally however puts huge strain on the Swiss National Bank (SNB).
The SNB’s task is to try and keep down the value of their currency and they do this in a number of ways. They put a high level of interest on currency held in their banks overnight and citizens are charged around 1% a year simply for holding cash in Swiss banks. They also are continually buying massive quantities of Dollars and Euros that they invest in stocks. This money is paid for by simply printing hundreds of billions of Swiss Francs. To put this into perspective the SNB is estimated to own about $80 billion in US stocks making them the 8 largest global holder and over €20 billion in Europe. So if you are looking to buy or sell the CHF you keep an eye economic data domestically, international risk appetite (as this drives demand for the safe haven CHF), and European news, as the SNB is trying to loosely peg its currency to the Euro.
Last Thursday we had the latest update from the Swiss National Bank where it confirmed that it has bought more than 47 billion Swiss francs of foreign currency this year. They kept inflation forecasts at 0.3% but cut them for 2018 to 0.35% from 0.4%. Generally this did not surprise the currency market and resulted in little change in its value on the day.
Moving forward this week anyone with CHF exposure will want to be looking to UK politics for further certainty, but also economic data due from Switzerland on Wednesday of this week. This is when they release Consumer indicators for the month of May. It is the most important component of Swiss GDP so can easily move markets. This is expected to show an improvement or bullish number and as a result will probably result in more demand for the CHF making it more expensive to buy. If you are looking to buy Swiss Francs it may well be prudent to secure your position before this event.
Thank you for reading today’s CHF report. I'd be happy to reply personally to any queries you have about an upcoming transfer, feel free to get in touch here.
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