USD/CHF extends its recovery and approaches 0.8100 after the Swiss CPI and PMI releases
- The Swiss Franc gives away gains as the US Dollar picks up from post-NFP lows.
- Swiss Inflation data beat expectations, but the weak PMI keeps hopes of further SNB easing alive.
- The Dollar corrects higher as investors sober up from Friday's Nonfarm Payrolls shock.
The Swiss Franc is the worst performer of the G8 currencies on Monday. Weak Swiss manufacturing data has offset the positive impact of the above-consensus inflation, while the US Dollar shows a mild positive tone following Friday’s sell-off.
Consumer inflation stalled in July, according to the CPI numbers released on Monday, which showed that the yearly inflation accelerated to 0.2% from 0.1% in the previous month, with the monthly CPI flat, against expectations of a 0.2% contraction, and following a 0.2% growth in the previous month.
These figures ease pressure on the SNB to cut rates below zero. Still, the impact on the Swiss Franc has been neglected, as the SVME PMI reported an unexpected deterioration in manufacturing activity, which, coupled with the hefty tariffs on exports to the US, increases concerns about the country’s economic outlook.
The US Dollar, on the other hand, is correcting higher following a sharp sell-off on Friday. US Nonfarm Payrolls data revealed that employment creation in the US has been much weaker than previously thought during the last three months, and boosted hopes of a Fed rate cut in September.
Data released on Friday showed that US payrolls saw a net increase of 73,000 in July, below the 110,000 forecast. More importantly, data from the previous two months was revised down by 258,000, while the Unemployment Rate increased to 4.2% from 4.1%.
Swiss economy FAQs
Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.
Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.
As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.