Swiss Q1 GDP Misses Expectations as Growth Softens; Franc Gives Up Some Ground
Growth in the Swiss economy during Q1 2011 slowed dramatically from Q4 2010 and grew at a much slower than expected pace. Quarter-on-quarter GDP came in at 0.3% missing expectations of 0.7% and slowing from 0.8% (revised down from 0.9%) in Q4 2010. The reading marks the slowest quarter of growth since recovering from four-straight quarters of contraction at the end of 2008 and early 2009.
A glance at the breakdown shows that despite low interest rates investment declined 0.3% q/q after 3.8% expansion in the final quarter of 2010, additionally the decent strength in the economy has led to little need for fiscal stimulus and as such government consumption slid 0.3% too. Other areas of weakness include household consumption and imports which both climbed at tepid rates. The shining light, as was expected amid a pick up in global demand, was exports which climbed 5.7% q/q.
The franc showed only muted reaction to the softer than expected reading and continued to ease against the euro (above) as news that Germany is considering a looser stance with Greece dominates price action. The Swiss franc has been trading at record highs against both the euro and US dollar recently and the government has launched measures to protect business from franc strength. The franc has been bought up as a safe haven asset, a shelter from the turmoil that is taking place across the EMU and until this turbulence subsides is likely to remain unusually strong. In the near-term we favour some unwinding of safe haven plays and a modest weakening in the franc as it consolidates its recent records against the euro and US dollar but we cannot rule out fresh record lows in Eur/Chf or Usd/Chf should things worsen on the EMU periphery.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.