Back
30 Nov 2015
Unexpected CHF strength adding to economic gloom - Swissquote
FXStreet (Delhi) – Peter Rosenstreich, Head of Market Strategy at Swissquote Bank, suggests that the stimulus effect of weaker CHF has faded with a strengthening CHF and with the stronger CHF has come a slower outlook for economic activity.
Key Quotes
“The November KOF Economic Barometer dropped to 97.9 (100.2 expected read) from a revised higher 100.4, meaningfully below its “long-term average.” The deceleration of the barometer was driven predominately by negative data from Swiss manufacturing activity and export related indicators. Clearly the Swiss economic is struggling with the CHF appreciation shock.”
“Earlier, Swiss sight deposits came in basically unchanged at chf468.6bn from chf468.3bn. The lack of expansion suggests that speculation over SNB intervention was erroneous. With heightened expectations for the ECB to over deliver easing at their policy meeting Thursday, the CHF has been appreciating against its primary trading partner.”
“In addition, Friday Swiss CPI is expected to remain in deflationary territory at -1.3% from -1.4% in October. The SNB is now caught between a rock and a hard place. With the CHF strengthening and inflation and growth indicators pointing to further deterioration, the central bank will be forced to act.”
“We anticipate that the SNB will respond to the ECB with their own deeper interest rates cuts accompanied with a tightening of exemptions thresholds, verbal intervention and direct FX intervention. Given the SNB aggressive history of inflicting the most damage with actions, traders will remain nervous and quick on the trigger over any CHF moves, as we saw last Friday. We remain bearish on the CHF over expectations for the SNB to act.”
Key Quotes
“The November KOF Economic Barometer dropped to 97.9 (100.2 expected read) from a revised higher 100.4, meaningfully below its “long-term average.” The deceleration of the barometer was driven predominately by negative data from Swiss manufacturing activity and export related indicators. Clearly the Swiss economic is struggling with the CHF appreciation shock.”
“Earlier, Swiss sight deposits came in basically unchanged at chf468.6bn from chf468.3bn. The lack of expansion suggests that speculation over SNB intervention was erroneous. With heightened expectations for the ECB to over deliver easing at their policy meeting Thursday, the CHF has been appreciating against its primary trading partner.”
“In addition, Friday Swiss CPI is expected to remain in deflationary territory at -1.3% from -1.4% in October. The SNB is now caught between a rock and a hard place. With the CHF strengthening and inflation and growth indicators pointing to further deterioration, the central bank will be forced to act.”
“We anticipate that the SNB will respond to the ECB with their own deeper interest rates cuts accompanied with a tightening of exemptions thresholds, verbal intervention and direct FX intervention. Given the SNB aggressive history of inflicting the most damage with actions, traders will remain nervous and quick on the trigger over any CHF moves, as we saw last Friday. We remain bearish on the CHF over expectations for the SNB to act.”