USD/CHF – Swiss franc steady after economic expectations slide

The Swiss franc has edged higher on Wednesday. USD/CHF is trading at 0.9176 in the European session, down 0.23%. The ZEW Economic Expectations index fell sharply to -43.3 points. In the US, CB Consumer Confidence improved to 1o4.2 points.

Banking crisis sends Swiss economic expectations crashing lower

The banking crisis has eased after causing market turmoil across the globe. Switzerland’s banking sector has taken a hit, as Credit Suisse, the country’s second-largest bank, collapsed and had to be rescued by rival UBS, with the Swiss government injecting some $108 billion to ensure that the takeover is completed. The reputation of the Swiss banking system has been badly tarnished and the fallout will likely have a negative impact on the Swiss economy.

Even before the banking crisis, the Swiss economy was sputtering. GDP was flat in Q4 of 2022, as a weak global economy meant less demand for Swiss exports. The economy was expected to grow by 1.1% in 2023, lower than average growth, and that figure could well be revised lower due to the banking crisis. Inflation hit 3.5% in 2022, much lower than in other major economies but high for Switzerland. The Swiss National Bank has tried to curb inflation with higher interest rates and delivered a 50-basis point hike earlier this month.

ZEW Economic Expectations has been mired deep in negative territory for over a year, but showed a significant improvement in January, rising from -40.0 to -12.3 points. The February reading, released today, came in at -41.3, as the January improvement was short-lived. We’ll get another snapshot of the strength of the Swiss economy on Friday, with the release of retail sales and the KOF Economic Barometer.

In the US, consumers have been concerned about their bank deposits and the stability of the banking system. Despite these worries, the Conference Board Consumer Confidence index improved to 104.2 in March, up from an upwardly revised 103.4 prior. Consumer expectations also rose, from 73.0 to 74.0 points. If the banking crisis does not worsen, the strong consumer expectation numbers should translate into increased consumer spending.

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USD/CHF Technical

• USD/CHF tested resistance at 0.9212 earlier in the day. The next resistance line is 0.9304
• 0.9106 and 0.9014 are providing support