At the start of 2017 we saw significant downside political risk to currency markets as we anxiously awaited the outcomes of milestone elections in the Netherlands and France and sought to understand whether President Trump would behave differently from Candidate Trump. Moreover, uncertainties around the Brexit process overshadowed the UK and the Eurozone.
The EUR/CHF exchange rate passed the 1.12 mark at the end of July, making the franc the weakest it has been against the EUR since the minimum exchange rate was abandoned in January 2015. The franc is cur-rently much less the focus of financial investors’ atten-tion than it was several months ago. The reason is the euro’s relative strength. Since the beginning of the year, the franc has depreciated against the euro by 4.5%. The relative easing on the currency front is also reflected in the trend of the SNB’s sight deposits – an indicator of the central bank’s intervention activity. Sight deposits have remained virtually unchanged re-cently, when means that the SNB hardly had to inter-vene on the currency market. The Governing Council has long been emphasizing that the entire currency situation is taken into consideration. Indeed, the CHF (like the EUR) has recently appreciated perceptibly against the USD. However, the central bankers cer-tainly still consider the current CHF weakness against the EUR to be positive.
Foreign trade: pharma bias and Zalando effect
Swiss foreign trade figures recently set a new record. Exports were stronger than ever before in the first half of the year, and imports were the highest they have been in eight years. In both trading directions, the pharmaceutical industry – as has become usual – made a substantial contribution to total growth. It was also pleasing that the metal industry registered a clear plus in its exports too. The strongest growth rate in exports came from the “textile, clothing and foot-wear” sector. However, this cannot be attributed to stronger exports by Swiss clothing companies but ra-ther to so-called returned goods. The Zalando effect that has been observed for some time once again led to a (putative) positive export result. Among the sales markets, Germany, the US and China were the undis-puted driving forces. The current exceptionally positive economic leading indicators show that the favorable foreign trade development will continue in the second half of the year too.
Swisscanto Asset Management International