Wednesday afternoon’s European trading saw the Pound remain in a tight range against the ‘highly valued’ Swiss Franc (GBP/CHF), around 0.10% higher at 1.3036. The Swiss currency has been deemed ‘significantly overvalued’ for a number of years by the Swiss National Bank (SNB), but after falling against the Euro (CHF/EUR) recently, the central bank changed its language to say that the currency remains ‘highly valued’.
This has been echoed today by the Swiss government which has also stated the Franc’s highly valued. This term has been used by the SNB since September as political uncertainties have stabilised in Europe. The Swiss currency is seen as a safe-haven asset and therefore any geopolitical risks can allow the currency to become very popular with investors.
SNB Chief Thomas Jordan reiterated that negative interest rates and the willingness of the central bank to intervene in the currency market should it need to, was imperative in order to keep the currency on a short leash.
A higher Swiss Franc has weighed on Switzerland’s economy which relies heavily on exports. For the past two-and-a-half years the central bank has introduced negative interest rates and intervened in the currency market where necessary in order to lessen demand.
The Organisation for Economic Co-operation and Development (OECD) has also spoken positively in the most recent country report when discussing the nation’s economic strength and resilience. However, the report goes on to suggest that Swiss expansion has been heavily reliant on construction and real estate, two areas that have benefited from the low interest rates. The OECD sites this as a reason for higher economic risk.
Meanwhile, in the UK, the Pound has been trending lower against a host of currency majors as investors digest the disappointing labour market figures. Tomorrow’s UK Retail Sales stats will be closely eyed also, to see how consumer consumption is faring in the wake of the Brexit referendum and regular bouts of political uncertainty.