Why the Franc Could Weaken After SNB Decision Today
December 13, 2018 1:41 pmVideo
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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.
The post Why the Franc Could Weaken After SNB Decision Today appeared first on Forex.Info.
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