There are two major events this week that could generate some movement CHF pairs. The second most important, though probably most volatility-inducing, is scheduled for early tomorrow morning. This will be the release of last month’s trade balance.
Of course, this is important data for any currency. However, the SNB is not shy about intervening in the currency to support exports. So the other, and more important event we have on the schedule is the central bank’s policy meeting.
Schedule and Expectations
The Balance of Trade is will come out at 08:00 CET (or 03:00 EST) tomorrow Tuesday. It will be the only major data point for the day.
Expectations for the balance range from CHF2.88B to CHF3.37B, with the preponderance of observers predicting closer to the top end of the range (similar to last month). This would compare to January’s CHF3.04B, which was already above the year’s average.
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Later in the week on Thursday at 09:30 CET (or 04:30 EST) we have the SNB’s interest rate decision and Monetary Policy Assessment. The broad consensus is that the bank will mostly stay pat on policy.
Given the range of estimations noted above, we can expect the market to be pricing in around a CHF3.0B trade surplus for February. A result coming in within that is likely to confirm trader expectations.
However, if the result were to come in above the top of the range, we could expect that to support the Franc, given that is already well above the average. A drop below the range of expectations wouldn’t be out of line. It would have to drop below CHF2.0B to be in line with poor previous performance.
We shouldn’t forget that in 2018, there was a drop in the trade surplus at the beginning of the year ahead of a slide Franc strength. Also, the last few trade balances have come in quite high. This could lead to some momentum in expectations for a continuation of good news and a miss on expectations, even though it might not be so bad in fundamental terms. It might spook some of the more complacent investors.
We all know that the SNB is constantly worried about export levels. Therefore, this is an important component to consider, especially with the poor economic performance registering in Switzerland’s major trade partners.
Over the previous months, exports had been outpacing imports, supporting a growing surplus. However, last month, we saw a reversal of this trend, with exports growing only 1.1% while imports continued to grow at 3.4%. While the SNB might feel comfortable with continuing increases in exports, the balance might still be of concern because of the rising demand for foreign products.
Swiss exports are also vulnerable because of the country’s reliance on luxury items. This is in a similar vein with their largest economic sector: finance. This is because as the economic situation deteriorates, luxury goods are typically the first to suffer a drop in demand.
This time around, analysts will not just be looking at the balance figure as a whole, but the dynamic between imports and exports. They’ll also be looking at how Swiss exports turning towards more growth-oriented economies like the US over the euro Area, will affect the balance.