Pound-Franc On Course to Slide Below Parity: J. Safra Sarasin
- Written by: Gary Howes
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It's happening: by 2027 the Swiss franc will be stronger than the pound, according to a new forecast report.
Swiss private bank J. Safra Sarasin says the long-term appreciation of the franc will continue and that this will mean the pound-franc exchange rate ultimately slips below parity, which will mark a major milestone in the pound's multi-year depreciation.
"We expect Swiss franc appreciation to continue given the relative structural advantages of the Swiss economy," Dr. Claudio Wewel, FX Strategist at J. Safra Sarasin.
In a monthly FX research report, Wewel says short-term dynamics have also supported the Swiss franc, which has risen since the beginning of the year, aided by safe-haven demand stemming from the war in the Middle East.
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Learn More →Indeed, CHF strength prompted the Swiss National Bank (SNB) to put markets on notice that it intends to intervene and weaken the franc if it doesn't stabilise.
Nevertheless, a gradual and steady appreciation remains J. Safra Sarasin's base case presumption for the CHF's outlook, which will be aided by the Swiss economy's perennial strengths and "high current account surpluses and a strong net international investment position."
By contrast, "Pound sterling looks vulnerable amid slowing domestic growth and elevated geopolitical uncertainty," says Wewel.
"Pound sterling continues to look expensive in real terms, suggesting that downside pressures should rise further out and the UK’s external and internal imbalances are set to remain a challenge in the foreseeable future," he adds.
J. Safra Sarasin forecasts the pound-franc exchange rate at 0.99 by the end of 2027 and 1.03 by the end of this year. The pair is at 1.06 at the time of writing.
Above: GBP/CHF since 2007.