Sterling rallies 12% against the franc
The pound has rallied more than 12% against the Swiss franc since falling to a historic low of less than CHF1.15 on 9 August 2011.
However, the franc remains the best performing major currency over the past year.
Perceived as a safe-haven, the franc’s rise has largely reflected market concerns the euro zone debt crisis is intensifying and the global economic recovery is running out of steam. However, the Swiss National Bank (SNB) has been keen to curb the franc’s rise, which it fears will act as a headwind to domestic growth and erode exports.
The SNB again repeated its view the franc remains overvalued, whilst increasing the supply of francs in money markets in order to weaken the currency. Speculation the SNB might adopt more aggressive tactics, such as temporarily fixing the franc’s value to the euro, also helped pare the franc’s gains.
The pound enjoyed another positive week against the US dollar, hitting a three-month high above US$1.66. However, economic data remained mixed. The UK's unemployment rate rose and the number of people claiming jobless benefits posted its largest rise in more than 18-months in July, as the labour market increasingly reflects the struggling economy.
The Bank of England minutes revealed a 9-0 vote for unchanged interest rates at the August meeting. Policy members Weale and Dale dropped their preference for higher interest rates, as the meeting noted the first unanimous interest rate vote since May 2010. Sterling gained some support as the majority of members (in an 8-1 vote) did not consider it appropriate to expand quantitative easing in the short-term.
The US dollar suffered at the hands of further global market uncertainty. There was little confidence in the US economy during the week as US jobless claims data were higher-than-expected. The Philadelphia Federal manufacturing survey showed heavy declines in its latest release. The US dollar came under further pressure as existing home sales also declined during July.
The euro endured another mediocre week; slipping just under a cent against the pound, but adding over two and a half cents versus the US dollar. Tensions remained high as discussion between German Chancellor Angela Merkel and French President Nicolas Sarkozy about ways to solve the euro zone debt crisis appeared to achieve little agreement.
Euro zone economic data also disappointed as Germany’s economy slowed sharply between April and June. Core euro zone inflation was also a weaker-than-expected, falling to 1.2% in July. Diminishing inflation and weaker growth will maintain pressure on the European Central Bank (ECB) to reverse recent interest rate rises.
Euro zone economic data also disappointed as Germany’s economy slowed sharply between April and June. Core euro zone inflation was also a weaker-than-expected, falling to 1.2% in July. Diminishing inflation and weaker growth will maintain pressure on the European Central Bank (ECB) to reverse recent interest rate rises.
The Australian dollar fell after the Reserve Bank of Australia’s policy meeting minutes suggested diminishing confidence in the global and domestic economic outlooks. The Canadian dollar was hindered due to poor manufacturing shipments data, along with a drop in foreign investments in Canadian securities.
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