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    USD/CHF: economic expectations have dropped in February on 19.02.2016

    While the pair EUR/USD is rising due to EU summit, which is currently taking place, the pair USD/CHF is declining. The pair USD/CHF has invert correlation with the pair EUR/USD, which is close to 95%. Franc has been declining due to probability of sudden interventions and unexpected decisions by SNB; therefore if we apply the theory of invert correlation, decline in the pair EUR/USD will trigger the rise in the pair USD/CHF

    Until the meeting of ECB on 10 March where the interest rate decision will be taken, Euro will be under pressure.

    Economic expectations index ZEW released last week fell in February (-5.9 in February versus -3.0 in January). The index evaluates business climate, labor market and other factors, which have impact on the state of Swiss economy.

    Amid declining prices of oil and commodities Swiss manufacturers continue to decrease selling prices. This fact and decline in Swiss exports to EU countries and China result in reduction of revenues from exports, which in its turn, forces export producing companies cut the workers or reduce wages. However, unemployment rate in Switzerland is low (3.4% in January).

    However, economic situation in Switzerland is deteriorating. Domestic consumption and retail sales are declining, causing pressure in the decreasing rate of inflation. Retail sales in January fell to -1.6% on annual basis against the forecast of -1.3% and decline of 1.7% in December.

    The price of Swiss Franc remains high. SNB believes that this was caused by the decline in Swiss exports. The bank keeps saying that they are ready to adopt drastic measures to support manufacturers and Swiss economy. The measures that can be introduced include interventions of franc sales and further decline of interest rates.

    In December Swiss National bank left interest rate unchanged at the negative level of -0.75%. Next meeting of the bank is scheduled for 17 March. If US Fed does not increase interest rate (according to the minutes of FOMC meeting it is quite feasible), SNB will be able to introduce additional measures to mitigate monetary policy.

    In this case uptrend in the pair USD/CHF will continue in the medium-term despite possible shart correction.

    Today’s news will include US consumer price index for January 15:30 (GMT 2). It is expected that the index by grow by 1.3% on annual basis. If it happens, the USD will strengthen and the pair USD/CHF will go up.


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