Swiss franc hits two-month low after weak GDP

  • Swiss GDP stagnates in Q2
  • Manufacturing, exports decline

The Swiss franc is in negative territory on Tuesday. In the European session, USD/CHF is trading at 0.8884, up 0.44%. The Swissie has lost over 1% since Wednesday and is trading at its lowest level seen mid-July.

The driver behind today’s losses was a disappointing Swiss GDP release for the second quarter. The economy flatlined in Q2, compared to a robust 0.9% gain q/q in the first quarter (adjusted for sporting events). Most of the GDP components pointed to a grim picture. Manufacturing fell 2.9% q/q, capital goods investment declined by 3.7% q/q and exports of goods slipped by 1.2% q/q.

Switzerland’s economy, which ran like a Swiss watch for decades, has fallen victim to weak global demand and high interest rates. Manufacturing is struggling and business and consumer confidence remain weak. ING is projecting growth of just 0.7% in 2023 and 0.6% in 2024, compared to 2.7% in 2022.

Despite these pressing problems, Switzerland has kept inflation at very low levels. August inflation was unchanged at 1.6%, within the Swiss National Bank’s target range of 0%-2%. The SNB hasn’t been shy about intervening in the foreign exchange market to stabilize the exchange rate, which has helped to control external inflationary pressures.

The SNB has raised rates by 250 basis points in the current tightening cycle, with the cash rate currently at 1.75%. SNB Chair Thomas Jordan has backed up his hawkish rhetoric about containing inflation with five straight rate hikes (the central bank only meets on a quarterly basis). The SNB meets next on September 21st and is expected to raise rates by a quarter of a point.

.

USD/CHF Technical

  • USD/CHF is putting pressure on resistance at 0.8899. Above, there is resistance at 0.8941
  • 0.8822 and 0.8725 are providing support

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

Latest posts by Kenny Fisher (see all)