Could Sterling/Swiss Bounce if Article 50 Activation Fails to Elicit Market Jitters?
Given that traders have been aware for a long time that UK Prime Minister would set the ball rolling on Britain's withdrawal from the European Union, by triggering Article 50, before the end of March, the fact that this is expected to occur on Wednesday might not necessarily therefore elicit more than a kneejerk reaction. Certainly, amid broader dollar weakness, cable (GBP USD) has not been exhibiting any particular signs of nervousness and indeed sterling hit a seven-week high against the dollar on Monday. Equally, although the pound has given a little ground against the euro in recent trading sessions, the moves in euro/sterling (EURGBP) have been measured. Traders however may not have paid that much attention to a recent rise in the value of the Swiss franc. Euro/Swiss franc (EURCHF) has again traded down to 1.0700 with the franc firming faster against the dollar (USDCHF) than the euro has versus the US currency (EURUSD). This is also evident in the move lower in sterling/Swiss franc (GBPCHF). Is it possible that some Article 50 uncertainty is being articulated through sterling/Swissy? If traders conclude that is the case and also decide that Article 50 activation is not going to be a material driver of currency moves, at least in the very short term, might not GBPCHF be seen as oversold?
Written by Neal Kimberley, External Currency Analyst.
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