Member Article

18 months later - shock due

Swiss economic momentum accelerated in the last quarter, more than expected due to the growth in government spending and foreign trade. Swiss gross domestic product grew 0.6 percent in the three months to June, after a revised growth in the previous quarter of 0.3 percent, according to the State Secretariat for Economic Affairs. Economic growth in the second quarter exceeded the forecasts of economists, who have in the survey predicted an increase of 0.4 percent. A year after the country suffered a stroke due to changes in exchange rate policy, export-oriented Swiss economy seems to be back on its feet. The demand for Swiss goods in countries such as Germany is recovering, but local companies are finding ways to reduce costs and improve productivity.Unemployment is low by European standards, a strong franc, for which the central bank says it is overrated, supported by domestic consumption, reducing the cost of imports. The positive contribution to GDP given in foreign trade and government spending, while household consumption stagnated, and investments in construction and equipment fell slightly. As far as exports of goods, chemical products and medicines are the most contributed to the growth. Companies in the mechanical, electrical and metal sector were most affected by the rise of the Swiss currency, which followed the decision of the central bank in early 2015 to abolish the limitation of the exchange rate of the franc. In these sectors is off 9,200 jobs in the light of changes in monetary policy, but employment is now stabilizing, and exports made a turnaround in the second quarter due to better US and European demand. Consumer price inflation in Switzerland fell in August by 0.1 percent after falling 0.4 percent in the previous month, which was in line with expectations of economists. A number of employees in Switzerland grew in the second quarter to 4.900 million from 4.878 in the previous quarter, while analysts expected a decline.

SNB Monetary Committee is comprised of three members who make decisions on interest rates. Unlike other central banks prefer SNB sets a range within which the moving rate of interest than the actual height. Similarly, Japan and the euro zone and Switzerland is highly export-oriented, which also indicates that the SNB has an interest and not to allow excessive strengthening of the national currency, therefore, rarely decide to increase interest rates. The strategy of monetary policy, the SNB is based on three elements. First, price stability, then the medium-term inflation forecasts and the third operational target range of benchmark interest rate - three-month Libor. Franc Swiss player includes 0.3% of global currency reserves. Located in the fifth place after the USD (62%), euro (24%), British pound (4.1%) and the Japanese yen (4.1%). However, for such a small country it has a very large foreign exchange reserves of 526 billion dollars. Located in the fifth place after China (3.3 trillion dollars), Japan (1.27 trillion dollars), the euro zone (932 billion dollars), Saudi Arabia (626 billion) and Russia (537 billion dollars), which increases the value of the franc.

Public debt consists of liabilities that require payment or payments of interest and / or principal. Here we include debt obligations in the form of SRD, a currency and deposits, debt securities, loans, insurance, pensions and other current liabilities. Inflation target 2.0% in CHF. Total debt was 34.7%. Consumer Price Index measures the average change in the price of the basket of goods and services compared to the previous month and compared to the same period a year ago. Is a measure of the total economic output earth, all products, and services in the period in which the measure. It is the fourth place after the EUR / USD, USD / JPY and GBP / USD. Crosses currency pairs are EUR / CHF, GBP / CHF, AUD / CHF. CHF / JPY, CAD / CHF. After Brexit referendum, the Swiss franc has become one of the save currency for trading. The euro and the pound dropped against the US dollar. Investors can use this currency to invest in the future.

Swiss National Bank Chairman Jordan has spoken. In his speech, he mentioned the purpose of connections between Swiss National Bank and education system. He also said that quality of education system could provide better labor market and efficiency of the Swiss economy. The economists will remain top level rated. They should have more knowledge. It can provide economic stability of the economy. It is a signal that the SNB could continue the monetary policy. The main currency pair USD / CHF worse than expected results of the US labor market reduced the likelihood that the Fed until the end of the year once again raises interest rates which have made a negative pressure on the US currency and stop the previous upward trend. During his speech, USD/CHF dropped 1%. Jordan sent a strong hawkish message and the Swiss franc becomes stronger almost 1%. It can see USD/CHF in the image below. It sharply dropped 1% from 0.97900 to 0.96900. Declining in price wasn’t caused only by the speech of Jordan. It was also bad economic data from the US manufacturing sector. The technical indicators are bearish and call for further downside.USD/CHF turning down with targets 0.9685 and 0.9645 in extension. The price will be tested the first support level at 0.96850. The price has oscillated below the first resistance level at 0.98200. It wasn’t broken. It can be expected a further decline in price.

Supports and resistances levels

0.98850 resistance

0.98550 resistance

0.98200 resistance

0.97020 Last

0.96850 support

0.96450 support

0.95950 support

Summary

The state of Swiss economy is stable. It includes excellent economic indicators like GDP, CPI and labor market. Even better than the euro zone. Only too strong franc can harm to exporters.

This was posted in Bdaily's Members' News section by Dwayne Buzzell .