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At the Forex currency market Swiss Franc rate is under some pressure from the USD on Wednesday, although trading session of Tuesday showed that in case of substantial deterioration in the external background the CHF will regain the status of the protective currency and hence, growth.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and is increasing, giving a pair buy signal; while volumes are below average. Stochastic Oscillator is going up in the neutral zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 0.8815, the pair USD/CHF will go to 0.8830 and 0.8850. If upward breakdown does not take place, the pair will consolidate close to the current levels.

Julius Baer Group believes that it is not clear yet whether Swiss economy requires the increase in the  interest rate or not: “any rise will have an impact on the economy as a whole for a year”. However it is quite possible that local economy and its recovery process are strong enough to cope with the interest rate rise to 1%-1.5%.

Note that real effective exchange rate of the Franc grew by 10% last year.
Swiss National Bank is going to discuss monetary policy issues on 16 June.

Mr. Jordan from the SNB said yesterday that the Bank is very concerned about Swiss Franc rates, although exports have coped well with the impact of the expensive currency. However, the CNB is going to take measures if the threat of deflation will continue to grow. This verbal intervention forced the Franck to roll back, and still remains under selling pressure. We would remind that inflation slowed down in Switzerland in April, which became another negative factor for the Franc, pushing the currency downward. It became known last week that the index rose by 0.1% m/m (+0.3% y/y) which is below the forecast of 0.6% y/y.

It became known earlier that index of investors’ economic expectations ZEW in May fell by 20.3 points in May, to the level of -11.5 points against the previous level of 8.8 points. Due to such background, a number of those who expected the increase of the interest rate in the next quarter have dropped sharply.

Meanwhile, economists do not assess Swiss economic situation as negative, on the contrary, it is described as “good” (majority -68.6% of respondents think so). The share of those, who expect the rise in inflation in the near future, has fallen to 51.4% (-25.1%).

The head of the National Bank of Switzerland, Mr. Hildebrand noted that strong and expensive Franc undermines exports and disrupts tourism industry; therefore negative impact of the CHF could be worse than predicted. “We intend to take any measures to achieve price stability” stressed the monetary politician. According to him, downside risks to recovery are still preserved, although economy demonstrates steadier growth rate than previously expected. It was worth noting Hildebrand’s statement that expansionary monetary policy constitutes a menace to a number of industrial sectors in the long term.

Important Swiss statistics of this week –index of leading indicators KOF- will be released only on Friday, 27 May. It is assumed that the index will decline to 2.20 points against the previous level of 2.29 points in April. 
 

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