The Swiss Franc has remained on the offensive, the third straight session of gains vs the US dollar. The downside of the USD/CHF cross currency hit almost 0.70% in intraday trading at about 0.8178 in morning trade in Europe. In doing so, price hit its second lowest point for the pair since April 21. That’s a sign of growing confidence in the Swiss economy.
Switzerland’s economy demonstrated resilience with a quarterly growth rate of 0.5% in the first quarter of 2023, surpassing analysts’ forecasts. Year-on-year, the Swiss economy grew at 2.0%, supported by strong exports and better-than-expected developments in nearly all economic sectors. The growth was particularly strong in the manufacturing sector with a whopping 2.1% increase as well as a 1.1% increase in construction activity.
Together with positive economic indicators, the attractiveness of the Swiss Franc is increasing. This is particularly relevant as April retail sales numbers disappointed, coming in with a modest 1.3% year-over-year growth. Analysts are closely monitoring the upcoming inflation data set to be released on Tuesday, which may influence the Swiss National Bank’s interest rate stance.
In Switzerland, exports drove the country’s post-pandemic economic expansion. That increase in shipments to the United States was most dramatic. The State Secretariat for Economic Affairs noted, “In particular, exports to the US rose sharply, pointing to possible front-loading in connection with US trade policy.”
From the broader economic picture, trade and the industries closely tied to it are going quite well right now. These sectors had a highly laudable growth rate of 2.1% in Q1. This increase is due to both higher economic activity in Switzerland and positive conditions for external trade.
The USD/CHF pair is headed for its six-week low. Market participants have their eyes peeled for signs in local economic data and more broadly on factors that might impact currency flows. Combined with the high US ISM Manufacturing PMI reading, this is great news as it looks to provide strong demand for Swiss exports. This development may be bullish for the Swiss Franc.