Overview, Knowing the Swiss Franc, Factors affecting the Swiss economy

Factors affecting the Swiss economy and the Franc

Consumer Price Index (CPI)

As a measure of Inflation the CPI indicates the prevailing rate of inflation and is calculated based on prices of retail items. A higher value points to inflationary trend and can cause SNB to react, impacting the Franc.

The GDP

The GDP indicates the net Production and Consumption of Goods & services in Switzerland. A rise in the GDP signifies a growing economy and will positively impact the CHF in the Forex markets.

The Current Account Balance

Traditionally, Switzerland has maintained an ever-growing Current account of Foreign Investor's funds. Any change in this trend will be viewed seriously by the FX markets and the CHF will affected. It must be remembered that Swiss economy relies heavily on Foreign Investments for survival & growth

Growth in M3

A sign of Inflation. The SNB constantly monitors the M3 index to sight any signs of increasing inflation. The M3 covers liquidity due to Currency, Time deposits & all kinds of Savings Accounts. Significant increase in the M3 index indicates growing inflation and will invite countermeasures from the SNB like change in interest rates. This is bound to impact the CHF as it rate of returns are affected.

The Unemployment Rate

A rise in the Unemployment rate does not augur well for the CHF as it indicates decreased economic activity within Switzerland. With the Banking industry absorbing 50% of the population and Banking being the core sector, this might require an introspection on their part. This is bound to affect the Swiss Franc.

The Industrial Production Index

Though the Swiss economy is dominated by the Banking sector, the Manufacturing sector contributes about 20% to its GDP. Hence, a sound industrial health is important for the Swiss economy. The Industrial Production Index indicates the growth in Industrial Output on a quarterly basis. A higher value on this index indicates a higher contribution of the Manufacturing Sector to the GDP and would have a positive impact on the CHF in the Forex markets.

Global Uncertainties

Terrorism, Economic Recession & similar negative developments can increase the global demand for the 'Safe Haven' Swiss Franc.

Overview, Knowing the Swiss Franc, Factors affecting the Swiss economy