According to the data, released by Swiss National Bureau of Statistics yesterday, consumer price index fell by 0.2% in November (0.3% on annual basis). According to economists, the decline in consumer price index was caused by the decline in prices in the services sector, including lower prices for packaged tours and hotels. Consumer prices in Switzerland have been declining in the past two years. The prices of imported goods have dropped by 1.5% in November. Thus, deflation in Switzerland continues.

Despite deflationary pressure the SNB has to intervene into the market and sell the Swiss franc, trying to keep in control its rise before the presidential election in the United States and investor’s increasing interest to safe-haven assets during this period. We can judge about this measure by today’s data on the foreign currency reserves of NBS, which have grown by over 648 billion francs in November, which is by 18 billion more than in October.

The efforts of the Swiss National Bank of reducing the price of the franc, including negative deposit rate and foreign exchange intervention are aimed at supporting national economy and producers of export goods.

According to the data released earlier, trade surplus of Switzerland decreased by 1.696 billion Swiss francs in October to 2.678 billion francs against 4.374 billion in September. Export from the country has decreased, while import has grown by 0.71 billion francs.

The SNB traditionally believes that, the franc is significantly overvalued. And this fact forces the SNB to continue extra-soft monetary policy in the country, holding deposit rate in the negative territory.

Next meeting of the SNB will be held on December 15, immediately after the two-day meeting of the US Fed.

Investors expect that the plans of the US President of Donald Trump to increase public spending and to cut taxes will support economic growth in the United States. It is likely that the Fed will raise interest rate at the meeting on December 13-14. However it seems that investors have already incorporated the rate hike into the price of the USD. It means that the USD will not rise significantly if the Fed takes such decision.

After the meeting the Fed will release revised forecasts for interest rates and economic indicators for the next few years. According to the Fed’s forecast made in September, it was expected that interest rate would be raised by a quarter of percentage in 2017, and three times in 2018 and 2019. Now, it will be difficult for the Fed to make any predictions due to uncertainty about the future economic policy.USD/CHF: The rise in the USD may suspend. Fundamental analysis for 07/12/2016




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