Dark clouds looming for the Swiss economy – Rabobank

FXStreet (Edinburgh) - Emile Cardon, Strategist at Rabobank, assessed the outlook for the Alpine economy in the aftermath of the SNB move.

Key Quotes

“Macro-economic data have –as expected– worsened as a result of the break of the floor”.

“For example, the manufacturing PMI declined from 53.6 to 48.2 and is expected to fall further. All subcomponents declined, with most notably the component “purchase prices”. This is not a surprise, given that imports have become cheaper since the break of the floor”.

“However, it is not only the exchange rate that has changed the economic environment. Oil prices have dropped by more than 50% and Swiss inflation has declined further”.

“Year-on-year consumer prices are in negative territory (-0.6%). We expect macroeconomic data to deteriorate further”.

“According to our models, exports will be hurt most and as inflation has turned negative, we expect that some Swiss consumers might get the impression that products will become cheaper in the coming months”.

“Our models also suggest that the impact will be delayed. Swiss companies have, to a certain extent, hedged themselves against FX fluctuations”