£/CHF

Sterling’s year-long rally against its Swiss counterpart looks to be running out of steam ahead of Friday’s (15 Aug) release of the second estimate of UK Gross Domestic Product (GDP) for the second quarter. This is expected to come in at 0.8%, unchanged from the first quarter.

The latest announcement from the Bank of England (7 Aug) failed to deliver any meaningful clues for the raising of rates, when it decided to leave its key interest rate and quantitative easing commitments unchanged. This has seen investors unwind sterling exposure resulting in a move lower across its major pairs.

The turnaround of late in risk bias across global markets will benefit currencies such as the Swiss franc, which continues to be perceived as a safe haven asset. This status will be supported by today's (14 Aug) release of the country's producer price index (PPI) data for July, which is expected to come in at 0%, unchanged from its previous level month on month. On the face of it this doesn’t look like a positive number but it does signal a continuation of a long-term upwards trend from May’s -0.3% post.

Key levels: The momentum has certainly subsided in the sterling bull run, but the technical’s point to a short-term pull-back in the GBP/CHF pair before a return to a move higher. Fortunately, we can plot those possible short-term downside targets using Fibonacci levels. The pair is currently trading at 1.5179, which is also the 38.2% downside level, which if a close bar is seen below could signal a push lower to 1.5023 (61.8%).