Why The Franc Could Weaken After SNB Decision Today

Switzerland is one of the most important European country. It is known for its important financial services and manufacturing industries. It is also known for its unique political direction in which it opts for direct democracy. It is also known for its neutrality, which has made the country avoid the many geopolitical issues of the past.

Today, the Swiss National Bank (SNB) will deliver its final monetary policy statement. Investors expect the bank to leave rates unchanged as it has done in the past three years. They also expect it to sound a little bit dovish.

This is because of a number of reasons. First, the SNB has always favored a weaker franc. This is because exports play an important role in the Swiss economy. As such, a weaker franc is better for the exporters because it makes their products more affordable. However, in recent weeks, the franc has strengthened slightly against the USD. Second, the recent data released by the government showed that the country’s economy slowed in the third quarter. Specifically, the economy contracted by 0.2%. This was because of weaker external demand and weak domestic consumption. In the statement, the Swiss statistics bureau said that:

The strong, continuous growth phase enjoyed by the Swiss economy for one and a half years was suddenly interrupted. Switzerland is thus following the significant economic downturn seen at the same time in other European countries, particularly Germany.

The manufacturing, services, and financial sectors declined while the business services and healthcare industries generated some growth.

Therefore, there are limited chances that the bank will talk about raising interest rates in this meeting. Instead, there are chances that the bank will talk about a continuation of the current easing policy.

The USD/CHF dollar has stayed below parity in the past one week. The pair has struggled to move up as traders wait for the SNB and the Fed. Today, the statement by the SNB could take the pair above the parity level. This is because of the fact that the SNB still wants a lower franc. In fact, the price is along the 100-day EMA and lower than the 50-day EMA.

1 2
View single page >> |

Disclaimer: The information found on forex.info are intended only to be educational, is not advice nor a recommendation and thus should not be treated as such. We strongly recommend that you ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.