Franc Drops as Swiss Economy Weakens

The dropped today as the macroeconomic reports showed Switzerland’s economy experiences problems, spurring the speculation about yen another intervention by the nation’s central bank.
This week started with the bunch of negative reports. The retail sales in Switzerland fell 1.9 percent year-on-year in August, compared to the overly optimistic forecast of a 4.5 percent increase. The SVME PMI fell from 51.7 in August to 48.2 in September. Reading below 50.0 indicates decline.
Last week wasn’t good either. The UBS consumption indicator dropped to 0.79 in August from 1.28 on July. The decline was explained by the poor business activity in the retail sector, as well as the strong franc that dampened consumer willingness to spend. The KOF Economic Barometer slipped from 1.61 in August to 1.21 in September, compared to the median forecast of 1.41.
Why the weak economy of Switzerland is so bad for the nation’s currency? Because the Swiss Central Bank likely will be worried by the signs of the economic weakness and can be forced to act. One of the possible measures that the bank may perform is raising the ceiling of the EUR/CHF currency pair that would weaken the franc even more.
USD/CHF jumped from 0.9102 to 0.9212, while CHF/JPY fell from 84.56 to 83.17 as of 23:41 GMT today. EUR/CHF traded at 1.2141, little changed from the opening level of 1.2151.

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