Swiss Producer & Import Prices Fall for 12 Consecutive Months

Overview
 Switzerland’s producer & import prices rose 0.1% in December after holding flat during the previous month, which was largely in-line with economists’ expectations. At the same time, prices tumbled 2.5% from a year earlier after plunging 3.3% in November, the Federal Statistics Office in Neuchatel announced today.  Though prices have gained slightly on the month, the drop in the annualized reading marks the 12th successive decline, and the ongoing strength in the Swiss Franc may continue to weigh on price growth as it lowers the cost of imported goods.

Breakdown
Taking a closer look at the report, import prices remained unchanged for the month, with petroleum products taking a free fall of 3.1%, and was followed by a 0.9% decline in energy products. With regards to producer prices, the reading rose 0.2% as furniture pushed 3.5% higher to lead the advance.

Forecast
The Organization for Economic Cooperation and Development (OECD) stated that the Swiss National bank should stick to its expansive monetary policy until the economic recovery gathers strength as the recovery remains fragile, with timing of an exit strategy serving as the critical base for both fiscal and monetary policy. On the other hand, SNB President Philipp Hildebrand stated that keeping the benchmark interest rate at the current level of 0.25% “over the longer term” would create “new problems” for the economy. However, investors have yet to succumb to the hawkish outlook held Mr. Hildebrand and are pricing a zero percent chance for a rate hike at the March 11 meeting according to Credit Suisse overnight index swaps, while they expect the central bank to raise borrowing costs by 45bp over the next 12months.

Market Reaction
There was little reaction to the data in the currency markets, but taking a closer look at the daily chart, the USD/CHF rallied overnight to reach a fresh weekly high of 1.0286, with the pair crossing above both the 50-Day SMA (1.0224) and 100-Day SMA (1.0267), and looks poised to test the 20-Day SMA at 1.0321 for near term resistance.



Written by Michael Wright, Daily Fx Research
Questions? Comments? Email me at mwright@fxcm.com