Swissie falls as GDP posts decline

The Swiss franc has posted considerable losses on Tuesday. In North American trade, USD/CHF is trading at 0.8952, up 0.41% on the day.

Swiss GDP slips

Switzerland’s economy contracted in the first quarter by 0.5%, compared to the forecast of -0.4%. This follows a weak gain of 0.1% in Q4. The soft performance in Q1 can be attributed to weakness in the service sector, as tighter health restrictions to combat Covid put a crimp in business activity and consumer spending. Retail sales in April were down 4.3% (MoM), as consumers are playing it cautiously due to the economic uncertainty.

Manufacturing remains a bright light in the Swiss economy, as an improving global economy has increased demand for Swiss products. Manufacturing PMI accelerated for a seventh consecutive time in April, as the PMI rose to 69.9, up from 69.5. This was just shy of the consensus of 70.0 and is a record high for the survey, which began in 1995.

KOF Economic Barometer climbs

The well-respected KOF Economic Barometer continues to break new records. The index rose to 143.2 in May, up from the April reading of 136.4 (revised from 134.0). The significant increase was driven by strong numbers from manufacturing and foreign demand. The barometer has now risen for a fourth straight month, and the near-term outlook for the Swiss economy remains positive, assuming that the battle against Covid continues to progress.

Switzerland, similar to the neighboring eurozone, had a sluggish vaccine rollout which led to a resurgence in Covid cases early in 2021. However, with the vaccine program gaining traction, Covid numbers are expected to decline, which should lead to stronger economic growth in the second half of the year.

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USD/CHF Technical

• USD/CHF faces resistance at 0.9044 and 0.9087
• On the downside, the pair is putting strong pressure on 0.8945. Below, there is support at 0.8899

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