The USD / CHF pair changed little after the president said the economy would contract by 10%.
The government is preparing to relax movement restrictions to cushion the economy.
Recent data from Switzerland shows that the unemployment rate has increased while the manufacturing sector has declined.
The USD / CHF pair changed little, as the government committed to opening the economy soon. At a press conference, President Simonetta Sommaruga said that her government was preparing to relax the current restrictions to ease pressure from individuals and businesses.
USD / CFH little changed as government prepares to ease restrictions
Switzerland hard hit by coronavirus
The Swiss economy has been badly affected by the current pandemic. Official figures show that more than 23,000 people have been infected. Over 800 of them lost their lives.
The economy has also been hit hard. According to the government, the economy could slide by more than 10% this year. It would be the worst performance ever recorded and will depend on the speed of return to work. It will also depend on the opening of neighboring and international markets after the crisis. The country’s economy shrank 3.9% at the height of the 2008/09 financial crisis.
Many industries in Switzerland have been affected. The manufacturing and industrial sectors, which employ thousands of people across the country, have stopped. This was demonstrated last week when the country’s manufacturing PMI fell to a record low of 43.7. Analysts polled by Bloomberg expected the PMI to drop to 40.
The employment situation is also not going well. Government data yesterday showed that the unemployment rate jumped to 2.9% in March. This is the highest level since June 2018.
This weakness is partly explained by the fact that most Swiss people stay at home. Another reason is that its main trading partners are experiencing similar problems. For example, Germany, its main trading partner, plans to go through a recession this year. The same is true for the United States, the other key trading partner.
Swiss bond yields rise
The effects of this weakness are also evident in the bond market. Yesterday, the country’s bond yields exceeded those of Germany for the first time in more than ten years. This is partly due to the fact that investors are rushing to EU bonds due to the large QE that the ECB is doing. This, in turn, led to a relatively stronger Swiss franc, which is a net negative for the country as it mainly depends on exports. The stronger franc is also partly due to the role of money as a safe haven. This means that investors go there in times of crisis.
This has been complicated by the fact that the Trump administration recently designated the country as a currency manipulator. This means that the SNB can do little.
In the meantime, the government has also intervened. The government has launched a $ 63 billion stimulus package that will help cushion workers and businesses. It is the most important stimulus the government has ever given.
USD / CHF forecast
Looking at the daily chart, the USD / CHF has been a bit volatile in recent days. This saw the True Range Average (ATR), which is a common measure of volatility, reach its highest level last year. The price is also between the exponential moving averages at 100 days and 50 days. In addition, the price is taken between the parallel channel indicated in black. Therefore, I expect the price to make a significant two-way breakthrough in the short term.