GBPCHF has been trading within a very tight range recently, with a movement of less than a 1% over the last 7 days. This can be accounted for the prolonged festive period break however this week volumes and movements have already returned. Economic data also returned and we saw the monthly report on the currency reserves held by the Swiss National Bank (SNB) which showed a decrease creating some CHF strength.
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We have also had a report recently on one of Switzerland’s leading exports, that of Swiss watches. This report showed a climb in November of 3.9% resulting in the total amount of exports for the month exceeding CHF 2 billion, something that is rarely achieved. A majority of the gain came from its second largest market, the US, where growth was seen of over 17% compared to the year prior which was put down to US economy expansion.
Later today we have unemployment and retail data due and tomorrow consumer spending is released. All of which are expected to show an improvement resulting in further strength for the CHF therefore probably making it more expensive to buy. Saying that however, as a safe haven currency the value of the Franc is widely impacted by global risk appetite. Meaning that in times of uncertainty or risk, investors buy the CHF, pushing up its value making it more expensive, and the opposite happens in times of global stability. In the immediate future watch out for any updates on the US-China talks concluding today as this could have an impact on how expensive the CHF begins along with any changes in Oil prices.
Longer term recessions and the prospect of the recession cycle coming around is also a factor to consider for anyone with CHF exposure.
Outside of Brexit and short-term economic data, global recession factors have been talked about increasingly over the festive break. Most recession cycles last around 8-9 years and as the last was in 2008 it has been suggested that this could well return once more. There is still debate as to where the next bubble could burst. Suggestions include the ‘crash’ in stock markets in December, the slowdown in interest hikes forecasted for the US through 2019, the end of cheap money, trade wars escalating, and personal debt levels to name a few potentials, (these have ballooned by nearly 50% in the last 5 years within the UK to an estimated amount of £75 billion.)
What has also concerned most is how the Central Banks would react. Traditionally they have cut interest rates and introduced more money into the system through QE however with interest rates close to record lows and Government debt at record highs these options may not be there with the next recession comes. For example, the European Central Bank (ECB) has printed over €2,850,000,000,000 (two trillion eight hundred and fifty billion) since 2015 to help sustain the EU economy, not quite the sign of a strong economy. This is something that has been emulated across the Western world leaving most with the question as to what banks would do if a recession came again.
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