Forex News: Franc Weakens as Deflation Strengthens in November
THE TAKEAWAY: Consumer prices drop 0.4% from November 2011 -> Statistics office predicts slight inflation in 2013 -> Franc weakens
The Swiss economy continued to see deflation for the 15th consecutive month in November. Consumer prices fell 0.4% from November of 2011, much lower than both the expected 0.1% drop in prices and October’s 0.3% deflation. Consumer prices are 0.3% lower than October according to the Federal Statistics Office.
The statistics office has predicted a 0.7% decline in prices for 2012 and 0.2% inflation in 2013. The Eurozone debt crisis encouraged capital flows into the Franc as investors fled from instability in the single currency, pushing the Swiss currency higher. This weighed on the price of imported goods in terms of the domestic currency, contributing to deflation. The Swiss National Bank has maintained a 1.200 floor in EURCHF trading to prevent the Franc from strengthening further, which is harmful to Swiss exports.
The Euro gained against the Swiss Franc following the announcement of deflation, possibly on the prospect that without any signs of inflation, the chance increase that the SNB will step up efforts to weaken the Franc. EURCHF is currently trading slightly above 1.2100, and resistance could be provided at the yearly high of 1.2183, and support could continue at 1.2033.
EURCHF Daily: December 6, 2012