USD/CHF Pair Declines As Swiss Economy Improves

Switzerland is a small European country of 8 million people and a GDP of more than $678 billion. The country is famed for its financial sector where the world’s wealthy store their funds. It is also known for its expertise in watchmaking and its industrial base. It is also known for its independence and political system that involves a lot of referendums.

The Swiss National Bank (SNB) is one of the closely-watched central banks in Europe because of the importance of franc. As a public company, SNB is different than other central banks. Part of the sources of its income is in global stocks. For example, it has more than $100 billion worth of stocks in companies like Facebook and Amazon. As such, when international stocks do well, the SNB benefits. When they do bad, the bank suffers as it happened in 2018, when the bank suffered a major loss.

The Swiss Bank will focus on the country’s softening economy. Data released today showed that the country’s growth for the fourth quarter was lower than what investors were expecting. On an annual basis, the country’s GDP grew by 1.4%, which was lower than the expected 1.7%. The previous reading of the GDP showed that the economy expanded by 2.4%. On a QoQ basis, the economy expanded by 0.2%, which was lower than the expected 0.4%. This was however better than the third quarter’s contraction of -0.3%. SECO said that this growth was attributed to the manufacturing sector. The statement said:

This was largely due to manufacturing (+1.5%). Following a breather in the 3rd quarter, the sector returned to dynamic growth, especially in the chemical and pharmaceutical segment. However, other industries also reported turnover increases, such as the watchmaking and precision instrument industry as well as the food industry. Manufacturing benefited from the strong international demand for Swiss products: exports of goods**(+5.6%) grew substantially.

The USD/CHF pair declined to a low of 0.9970. This price is along the 21-day and 42-day EMA while the MACD has been declining. The pair will likely continue moving lower to test the important support level of 0.9950.

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