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“Avoid GBP,” Forecasters Say; Swiss Franc Volatility to Increase

Posted Oct 03, 2018

It’s no time to be brave with your British pounds, think foreign exchange experts at Crédit Agricole.

“Stay conservative; avoid GBP,” the bank’s research team wrote on Tuesday.

The pound has had a mixed year. As of writing, its 3.9 percent year-to-date loss against the US dollar ($1.299) is balanced by a 5.2 percent gain against the Australian dollar (A$1.817) and an unchanged position relative to the euro (€1.126).

The pound’s fate obviously hangs to a large extent on what happens with Brexit and Crédit Agricole aren’t convinced that the pound will exit the woods safely.

“Investors should remain cautious on the near-term outlook for GBP. Indeed, we think that the FX market participants will demand more concrete evidence that the UK and the EU are moving closer to a deal before unwinding [GBP short positions],” Crédit Agricole wrote.

In other words, bets against the British currency are still valid, and that means that holders of pounds might benefit from exchanging them now, prior to a depreciation in their value.

For the Swiss franc—the second-worst performing G10 currency of the past month—volatility is set to increase.

Bloomberg are quoting strategists at Bank of America Merrill Lynch, who say: “Mounting concerns over the continued impasse in EU-Swiss negotiations to streamline a complex relationship of bilateral agreements is looming large on investors’ radar screens . . . [and] with Brexit negotiations also approaching their climax, we think a period of elevated [franc] volatility is in store.”

The franc has shed 3.5 percent of its value relative to the US dollar (Fr.0.988) in the past eight trading days and has fallen in the process to a six-week low. Against the euro—a more important measure of franc performance—it has slid 2 percent (Fr.1.14).

Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.