GBP/CHF: Fundamental Review and Forecast

The GBP continues to be under pressure as the UK Prime Minister has been chosen according to investors' fears.

Economic News
2019年7月24日

The downtrend continues and attracts traders with its continuity and stability. The pound remains under pressure due to Brexit, as well as the economic downturn in Britain and the EU. This week the pound was in the spotlight after the fears of investors were justified and Boris Johnson was elected to the post of Prime Minister. Jonhson is a supporter of the hard scenario of Britain's exit from the EU. A week earlier, the pound had already reached an absolute low against the CHF and is likely to continue to decline. Now investors will follow the first steps of Boris Johnson to confirm his previously announced plans to exit the EU on October 31 with or without a deal. As for macroeconomic reports, they did not contribute and are unlikely to contribute to the strengthening of the pound, given the unfavorable conditions for the British economy.

The CHF is not under such pressure as the pound and can receive support maintaining its status of a safe asset. In addition, the macroeconomic reports on the Swiss economy favorably differ from other countries in the region: business sentiment is improving and the trade surplus is growing, updating the maximum for 30 months.

In the current situation, we suppose that the pound will not decline rapidly in the near future, as it did before, but will remain under pressure. In particular, the Bank of England, which is likely to leave the current rate unchanged or think about its reduction, is not expected to contribute to the strengthening of the pound next week. At the same time, the CHF can receive support in case of an aggravation of the trade conflict between China and the USA, and also the conflict of the US with Iran. Therefore, the deals to SELL are still relevant in the long term.

Stanislav Litinskyi

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