Swiss Economic Sentiment Plunges To Lowest Level in 5-yrs

Swiss Economic Sentiment Plunges To Lowest Level in 5-yrs
March 31, 2020


The index reflecting the Swiss economic scenario plunged to a five year low in March as the coronavirus (COVID-19) outbreak continues to create havoc across the globe. However, the Swiss franc managed to gain against the euro as the Eurozone economic confidence recorded its steepest ever decline in March as the virus impacted all business sectors.

Data published by the KOF Swiss Economic Institute indicated that the Swiss economic situation indicator declined to a four-month low of 92.90 in March, from 101.80 (upwardly revised from 100.90) in the earlier month. The reported figure is far below its long-term average.

Along with the reading, the institute issued the following statement: “Accordingly, the Swiss economy can be expected to see a marked decline in growth rates in the near future. This plunge of the Barometer reflects the first economic consequences of the accelerated spread of the Coronavirus.”

The latest decline was the most significant since January 2015 when the SNB (Swiss National Bank) renounced the limit of the minimum exchange rate for the franc.

KOF further stated: “Its troughs at the time of the economic crisis in 2008/9 were still significantly lower, but a large part of the survey responses underlying the Barometer were received in the first half of March, i.e., before the measures taken by the Federal Council on 16 March severely restricted economic activity in Switzerland.”  

The decline is so far driven by the poor performance of the manufacturing industry, with adverse signals from export-oriented sectors. Sentiment declined sharply in all kinds of manufacturing industries and construction sector, with textile and metal industry bearing most of the brunt. However, sentiment towards the food industry was much better than in other sectors. The assessment was made on the basis of orders and production.

Despite the weak outlook, the franc managed to gain against the euro as data published by the European Commission indicated a gloomy economic scenario. The data indicated that the economic confidence index slumped to 94.50 in March, from 103.40 in the earlier month. Nevertheless, the reading exceeded economists’ expectations of 91.60.

The EU cautioned that data released today might not reflect the current scenario as the survey was conducted between February 26th and March 23rd. The fieldwork was stopped at different dates in the EU member countries as various measures to limit the spread of coronavirus was implemented.

The breakdown in confidence was specifically substantial in services and retail trade. The services confidence index plummeted to -2.20 in March, from 11.10 in February. The figure was predicted to decline to -5.0. The historical decline was stoked by managers’ plunging demand anticipations, validation of past business scenarios, and previous demand.

The indicator for retailers’ confidence dropped to -12.40, from 1.10 in the last month. The sharp decline in retail trade confidence mirrors an unexpected drop in retailers’ validation of the anticipated business scenario. Mainly due to managers’ weak production anticipation, the industrial sentiment index dropped to -10.80, compared with -6.20 in February. Economists expected a reading of -12.60.

The consumer confidence indicator declined to -11.60 as forecast earlier, from -6.60 in the earlier month, primarily due to an unusually powerful decline in anticipations regarding the overall economic scenario. The construction sentiment index declined slightly to 2.7 in March, from 5.40 in the prior month.

During the same period, selling price anticipations fell considerably in all four business divisions, also driven by services and the retail sector. Additionally, the business confidence index fell to -0.28 in March, from -0.06 in the earlier month. The weak economic data from Switzerland and the Eurozone is expected to keep the currency pair range-bound with bearish bias in the near-term.

Technically, the EUR/CHF pair has started declining after facing resistance at 1.0600. The next major support is anticipated only near 1.0530. Furthermore, the currency pair is trading below its 50-day moving average. The stochastic oscillator is also in the bearish zone. Therefore, we are anticipating the stock to decline in the short-term.

CHF - technical analysis - 31st March 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.



Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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