Switzerland is a small country in
Europe. It has a population of more than 8 million people and a GDP of almost
$700 billion. The country derives most of its income from industrial exports. The
main export items are machinery, watches, and chemicals. Its biggest trading
partners are Germany, United States, India, and Hong Kong. Its most well-known
companies are UBS, Rolex, Nestle, ABB, and Novartis among others. The country
is well-known for its neutrality on global issues and for its financial sector.
As a result of its independence, it has avoided joining the European Union.
Instead, the country does trade with the bloc using around 100 secondary
agreements. In recent years, the country has attempted to create a meaningful
deal with Europe.
Since the country depends mostly
on exports, the stability of the Swiss Franc is of great importance to the
policymakers. In 2015, the SNB suddenly removed a peg that was there between
the euro and the Franc. In recent months, the SNB has complained that the Franc
is indeed overvalued. This statement allows the central bank to put in place
measures of devaluing the currency, which potentially can increase the export
industry.
However, it will be difficult for
the SNB to devalue the currency again. This is because its base lending rates
is still in the negative. As such, the bank does not have any potential tool in
place to lower the currency. At the current interest rates, the Fed can easily
devalue the dollar by lowering rates and even taking them to the negative territory.
In recent months, data from
Switzerland has been relatively soft. The trade surplus has declined from more
than $4.7 billion in November last year to $3.12 billion in February this year.
As shown below, the economy has also been growing at a significantly slower
rate.
Today, the country will release
the unemployment rate numbers. In all measures, the country has remained in
full-employment for years. The unemployment rate has declined from 3.5% in May
2016 to a low of 2.4% in February.
The USD/CHF pair has remained
closer to the parity level in the past few days. This is as investors ponder on
the next move for the Swiss National Bank. On the chart below, this price is
along the 21-day and 42-day moving averages, with the Relative Strength Index
(RSI) moving in an upward trend. The pair is likely remain within these levels
as traders wait for the next actions on global trade.
The post USD/CHF Pair Remains in Parity Ahead of Swiss Employment Numbers appeared first on Forex.Info.