- Swiss franc climbs to 4-month high
- Swiss GDP rises 0.3%
- US ISM Manufacturing PMI is expected to rise slightly
- USD/CHF is testing resistance at 0.8736. Below, there is support at 0.8650
- 0.8736 and 0.8774 are the next resistance lines
The Swiss franc is lower on Friday. In the European session, USD/CHF is trading at 0.8723, down 0.22%.
Swiss Franc Continues to Climb
The Swiss franc continues to power higher against a slumping US dollar. USD/CHF has fallen 1% this week and plunged 3.8% in November. On Thursday, USD/CHF touched a low of 0.8684, its lowest level since July 31.
The Swissie’s rapid appreciation is likely causing sleepless nights at the Swiss National Bank. Policymakers at the central bank follow the exchange rate carefully and have not hesitated to intervene in the currency markets as a monetary policy tool. The stronger Swiss franc has helped dampen inflation but the SNB doesn’t want the currency to be too strong since that hurts the crucial export sector. If the Swiss franc continues to lose ground, the SNB could respond with some verbal intervention and express concern about the Swiss franc’s high value.
Swiss inflation is in a good place, within the 0%-2% target, but the economy remains weak. Swiss GDP rose by just 0.3% q/q in the third quarter, up from a revised -0.1% in Q2 and above the consensus estimate of 0.1%. The services sector was the main driver of growth as manufacturing was flat and consumer spending posted modest growth. The GDP report noted that the “international environment remains challenging”. Global demand remains weak, and the EU, which is Switzerland’s largest export market, posted 0% growth in the third quarter.
The US wraps up the week with the ISM Manufacturing PMI. The manufacturing sector has been in a deep slump and the PMI has indicated contraction for twelve consecutive months. The PMI is expected to improve to 47.6 in November, compared to 47.6 in October. A reading below 50 indicates contraction.
We will also hear from Federal Reserve Chair Powell later today. Investors will be looking for hints about upcoming rate decisions. Powell has stuck to his script of a ‘higher for longer’ rate policy, but the markets have fully priced in a rate cut by May, up from 65% a week ago.