uploads///CHF Dec

Swiss Franc Unaffected by Lower-than-Expected GDP Data


Dec. 2 2015, Published 2:55 p.m. ET

Swiss franc inched higher ahead of ECB meeting

The Swiss franc was trading slightly higher versus the US dollar on December 1, 2015, even as the GDP reports pointed toward slowing growth in the Swiss economy. A significantly overvalued Swiss franc and weak recovery in the construction, financial, and energy segments contributed to the flat quarterly growth in Switzerland’s GDP.

The SNB (Swiss National Bank) has been feeling the pressure of an overvalued Swiss franc since it unpegged from the euro at the beginning of 2015 and prior to easing by the ECB (European Central Bank). The SNB has already kept the benchmark rates at -0.75%. It may need to ease its policy further during the upcoming meeting on December 10, 2015, in order to further devalue the Swiss franc in the event of easing by the ECB.

Earlier this month, SNB chairman Thomas Jordan kept a dovish stance regarding the monetary policy outlook as the deflationary environment persisted. We discussed this stance in Swiss Franc Falls on Lower Inflation and Dovish SNB.

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3Q15 GDP below forecasts

The Swiss GDP for 3Q15 was 0.8% on a year-over-year basis against an expectation of growth maintaining the previous quarter’s trajectory of 0.9%. On a quarter-over-quarter basis, the economy remained flat against expectations to mirror the previous quarter’s increase of 0.2%.

Retail sales, manufacturing PMI also disappointed

October’s retail sales fell on an annual basis by 0.8% against a growth of 0.2% in September and higher expectations of a 0.4% increase. On a monthly basis, retail sales in October increased 0.3% against a 0.1% rise in September.

The manufacturing PMI (purchasing managers’ index) also released at a dismal 49.7 for November, below the threshold of 50 that separates expansion from contraction. October’s manufacturing PMI was 50.7 and was anticipated to increase to 51.

Impact on the market

Looking at Swiss ETFs, the iShares MSCI Switzerland Capped ETF (EWL) rose by 0.58% on December 1, 2015. On the other hand, the Guggenheim CurrencyShares Swiss Franc ETF (FXF) increased by 0.14%.

Swiss ADRs (American depositary receipts) were trading on a mixed note, and ABB (ABB) fell by 1.2%. In contrast, Logitech International SA (LOGI) rose by 0.67% and Credit Suisse Group AG (CS) was trading higher by 1.0%.


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