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Swiss Franc Mixed As Retail Sales, Manufacturing Slump

October 3, 2019 at 19:46 by Andrew Moran

Faces on the Swiss franc notesThe Swiss franc is mixed against currency competitors on Thursday after new data highlighted a slumping retail sector and a bearish manufacturing industry. Despite the central bank trying to do everything it can to debase the franc, investors are still pouring into the safe-haven asset and boosting the franc’s value.

According to the Swiss Federal Statistic Office, August retail sales fell 1.6%, down from the 0.3% decline in July. Year-on-Year (YoY), retail sales have tumbled 1.4%, which is way below the median estimate of 1% growth.

On Wednesday, the Swiss manufacturing purchasing managers’ index (PMI) dropped to 44.6 in September, down from 47.2 in August – anything below 50 indicates a contraction. The market had penciled in a reading of 46.5. This is the sharpest contraction in the manufacturing sector in more than a decade. All the sub-indexes remained in the red: production, new orders, purchasing volume, purchasing prices, stocks purchased, sales stocks, and employment. The last time the Swiss manufacturing PMI was in positive territory was in March.

The consumer price index (CPI) dipped 0.1% last month, the third decline this year.

Speaking in Zurich this week, Swiss National Bank (SNB) governing board member Andrea Maechler stated that loose monetary policy is the only way to tackle low inflation and cooling economics. As the world grapples with trade uncertainty, Brexit chaos, and Iranian tensions, Maechler believes subzero interest rates will linger much longer than initially anticipated.

Last month, the Federal Reserve and the European Central Bank (ECB) cut interest rates, but the SNB left rates unchanged below zero, which has been the case for more than five years.

She added that lower productivity will lead to lower real growth, causing rates to fall.

The issue is, how do you make sure you transform the savings into productive investment that can then increase productivity. This is what’s not been happening enough.

This is why today’s heightened uncertainty is so bad, precisely because it hits not the ‘sweet spot,’ but the ‘pain spot’: The desire to actually invest and have a positive outlook for the future.

The USD/CHF currency pair rose 0.19% to 0.9987, from an opening of 0.9970, at 19:27 GMT on Thursday. The EUR/CHF climbed 0.27% to 1.0956, from an opening of 1.0926.

If you have any questions, comments, or opinions regarding the Swiss Franc, feel free to post them using the commentary form below.

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