GBPCHF rates have pushed up this week and now sit within a cent of the highest level seen within the last 4 months. Over the last 3 weeks GBPCHF has been climbing almost in a straight line with only 3 days of losses. This climb of over 6 cents, or nearly 5% results in a well-timed £200,000 transfer of CHF buying an additional CHF 12,000.
|Currency Pair||% Change in 1 month||Difference on £200,000|
One of the main reasons for the negative direction for the CHF outlook has been a fall in demand for the safe haven currency. This follows a fall in tensions in the White House with regards to US-China trade and the suggestion that they will meet at the next G20 meeting in November. As the Franc is a safe-haven currency it generally tends to rise in value in the event of global bad news and fall on good news. This is generally as investors flock to it at times of worry pushing up demand and therefore value.
The CHF is also widely used as a carry trade base; this is when financial investors borrow money in a low yielding currency to invest in a higher returning currency. So, traders would borrow money in CHF and invest in the AUD or USD for example. The changing global market changes demand for currencies and can also easily have an impact on its value.
With Interest rates in the US widely expected to climb higher still, traders have been borrowing more funds which they have moved out of the CHF adding to its weakness.
Domestic economic data also has an impact on its value. Most recently Producer and Import Prices were released on Monday, which showed a lower than expected figure falling to 2.6% whereby the market was expecting 3.1%.
Next on the horizon is the overall trade balance, both import and export figures which are released on Thursday morning. I personally see a fall in these figures and therefore expect the CHF to weaken further as we end the week. As a result, CHF buyers may want to wait until the end of the week with a hope of better levels whereas sellers may wish to move beforehand to avoid disappointment.
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