Market Overview

Swiss Franc Falls Against U.S. Dollar on Deflation Pressures


The Swiss franc lost some ground against the U.S. dollar on Wednesday, after the first signs of deflation appeared. at around 1:15 pm GMT, the U.S. dollar rose 0.68% to 0.8512.

The Swiss currency was pulled back by unexpected price level data which showed deflationary pressures. According to the Federal Statistics Office, the Swiss producer and import prices fell in April by 0.2% compared to a month earlier and 0.4% compared to a year ago. The deflation data should probably persuade the Swiss central bank not to raise its interest rates on Thursday.

In recent times, the Swiss economy posted very strong results. As a result, the Swiss franc rose to new heights against other currencies. The value of the franc was further supported by unstable recovery in the Eurozone and the United States. The Swiss economy is exports-oriented, however, and strong franc might cripple the Swiss economic growth. The Swiss central bank, therefore, will be reluctant to provide more steam to the Swiss currency.

In spite of recent setbacks, the franc is still too strong for the euro as the European currency lost 0.49% of its value to trade at $1.2148. The euro has been hit hard by recent developments in Greece, where the government is trying to push through parliament yet another austerity packet as the Greeks gather at mass protests in front of the parliament building.

The euro failed to find strength in better than expected industrial production data. According to Eurostat, industrial production in the EU rose unexpectedly by 0.2% in April, compared to a month earlier, from 0% recorded in March. Most analysts had predicted a fall of 0.2%. At an annual rate, the EU industrial production rose 5.2% in April, down from 5.8% in March.

Traders who believe the Swiss currency has risen too far and will soon start to hurt the Swiss growth performance, forming a lot of downward pressure on the franc, will be interested in the ETFS Short Swiss Franc Long US Dollar ETC ETF (SCHF).

Other traders will think that the continuing uncertainties about the debt-ridden economies on the Eurozone periphery, along with an unstable recovery in the United States, will provide sufficient tailwind for the franc. Traders who find appeal in this scenario will be more interested in the CurrencyShares Swiss Franc Trust ETF (NYSE: FXF).

Posted-In: News Currency ETFs Forex Economics ETFs


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