Brexit and the Swiss franc: the story so far

The pound sterling has fallen around 15% against the Swiss franc since the Brexit referendum on June 23 last year. But as Britain gives its official notice to leave the EU, most experts believe the markets have already priced in worst-case scenarios.

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The pound incurred most of its losses in the first four months after the Brexit vote. At its lowest point in October, the British currency was worth less than CHF1.20 but has since found stability at around CHF1.23. 

Sterling fell so much on the day of the referendum, and in the following days, because the markets were unprepared. All the consensus had pointed to Britain voting to stay in the EU. 

There then followed a period of political and legal uncertainty about whether Britain would in reality leave the EU, and if so, on what terms. The realisation that Britain and the EU might be on a collision course for a messy divorce culminated in the “flash crash” of sterling in October. 

A series of legal challenges to determine exactly who had the authority to trigger Article 50 sparked further uncertainty before the wrangling culminated in a January court ruling that parliament must decide. Parliament duly approved the Brexit plan earlier this month, clearing the way for the official divorce papers to be served on Brussels. 

Foreign exchange experts, like Constantin Bolz at UBS bank, believe the worst of the market volatility is now over. UBS calculates the sterling-franc exchange rate will stay at around CHF1.23 for the next three months before moving into the CHF1.25-CHF1.30 range for the following 12 months. 

Bolz believes there may be some minor turbulence in the next two years as each deadline in the British-EU negotiating process is reached. But he also feels that the pound will achieve gradual upward momentum nonetheless. 

Foreign exchange markets have accounted for most eventualities, including the possible split between Scotland and the United Kingdom, he said. 

Brexit also had less of an effect on Swiss National Bank activity than might have been presumed. Besides intervening in the foreign exchange markets on June 23, and the next few days, the SNB spent far less in defence of the franc last year (CHF67.1 billion) than it did in 2015 (CHF86.1 billion).