Swiss currency under pressure (Daily analysis 20.04.2018)

Friday had a calm start but a different situation was seen on the franc and the pound. These two currencies were clearly below in red. The EUR/CHF reached new highs of more than 3 years and the GBP/USD pair was the lowest in two weeks. The zloty was supported by the global weakening of both currencies.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

• A lack of macro data may noticeably impact the analyzed currency pairs.

Pound and franc below in red

The main currency pair's quotations, the EUR/USD pair, have remained unchanged. However, slightly greater fluctuations were observed in the case of the British currency. Today, the GBP/USD rate fell to around 1.40 level, the lowest in two weeks. Also, the pound in relation to the zloty fell to about 4.74 PLN in the morning - the last time we observed such a low rate just over a month ago.

For the past few days, a general weakening of the pound was observed, which was connected with weaker than expected data on consumer inflation. Today, however, another argument can be introduced to the market that may depreciate the pound. Today, Bloomberg news agency announced that the European Commission will reject the solution proposed by the United Kingdom, to leave the invisible border throughout the Kingdom.

As a result, the EC would cut Northern Ireland off completely from the rest of the UK, which is something the Theresa May government will not agree to. The probability of further tensions between the UK and the EU is therefore increasing, which may hamper the final settlement of the Brexit and cause a negative pressure on the pound.

In the morning, the franc depreciated again. Yesterday in the afternoon, the EUR/CHF exchange rate exceeded 1.20 for the first time since the Swiss central bank (SNB) released the peg in January 2015. Today, the euro exchange rate in relation to the franc reached its new hights since then, rising once again above 1.20.

Although the exchange rate fell below that level in the following hours, SNB's ultra-mild monetary policy should keep the franc under pressure. It is also a good signal for those who have loans denominated in francs. The chances that the franc's exchange rate will pare losses quickly are limited. The franc's price per unit oscillates around 3.48 PLN, so close to the lowest level since mid-December 2014 and around 0.06 PLN below the level that was observed before releasing the peg.