Swiss Franc Rally Runs Out of Steam

February 8, 2011 - Written by John Cameron

STORY LINK Swiss Franc Rally Runs Out of Steam

There was no significant data released yesterday in Switzerland. This meant that additional significance was attached to this morning’s Swiss Unemployment figure for January. Switzerland currently enjoys one of the lowest rates of unemployment of all of the world’s major economies – it currently sits at 3.8%. This morning’s figure showed no change in this rate, which provided some very short-term support for the Franc.

Early trading during today’s session saw it strengthen against Sterling by about 0.5c on the wholesale markets.
Earlier yesterday morning, Swiss private bank Julius Baer posted better-than-expected profit figures showing their annual net profit rising to CHF504m. This shows that Switzerland’s key banking industry remains in a strong state. However, Chief Executive Boris Collardi commented that profits would have been even stronger were it not for the unprecedented appreciation of the Swiss Franc which was seen in 2010.

The Swiss Franc lost some ground yesterday against the Euro as European Central Bank governing council member, Yves Mersch, commented that the ECB may elect to raise interest rates before they stop their current asset purchase scheme. The hawkish tone of this comment caused a shift in funds out of Switzerland into the Eurozone.

Thursday’s Swiss inflation figure is the key release for the remainder of the week with it expected to show that inflation remains at low levels in Switzerland. Inflation can be imported when a currency appreciates strongly over the short-to-medium term, so it is possible that this figure could provide further support for the Swiss Franc.

The market appears to be relatively unphased by the current political crisis in Egypt which has meant that the Swiss Franc has failed to benefit from its safe haven status. Given this and the fact that the Swiss Franc has reached significant highs in recent times, a period of sideways trading is anticipated. Now may be the time to move money home from Switzerland.

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