Switzerland's inflation rate nears 0%

The Swiss franc strengthened slightly over the past week amid a weakening US dollar, following reports of potential negotiations between the US and Russia to end the ongoing war in Ukraine. Meanwhile, Switzerland’s inflation rate fell for the second consecutive month in January, dropping more than the Swiss National Bank (SNB) had anticipated, with a target range of 0-2%. However, core inflation, which measures domestic growth potential, reassured the SNB that inflation within the country would continue to rise in the future.

Switzerland’s inflation rate fell to 0.4% year-on-year in January, down from 0.6% in December, marking its lowest level since April 2021. This raised concerns that inflation might fall below 0% and drop beneath the central bank’s target. The recent decline was driven by continued deflation in the food and beverage sector, which dropped by 1.1%. At the same time, price pressures in household goods and services also continued to fall by 1.4%. Meanwhile, core inflation, which excludes volatile food and energy prices, increased to 0.9% from 0.7% in December.

Switzerland’s unemployment rate rose from 2.8% in the previous month to 3% in January, marking the highest level since 2021. The number of unemployed individuals increased by 5,500 to 135,800. At the same time, youth unemployment, measured among job seekers aged 15 to 24, rose by 2.8%, adding 200 unemployed individuals to a total of 12,300. This contributed to a sharp increase in job vacancies, which surged by more than 11,600 positions.

Switzerland’s trade surplus shrank to 4 billion Swiss francs in January from 4.4 billion francs, as imports fell less sharply than exports. Imports dropped 6.8% month-on-month to 18.7 billion francs, driven by a 19.5% decline in chemical and pharmaceutical purchases and a slight slowdown in machinery and electronics imports. Imports from Australia saw the largest drop at 57.5%, followed by Japan at 34% and Canada at 31.9%. Exports fell at a slightly faster pace, decreasing by 6.9% to 22.7 billion francs, reflecting a 12.5% drop in chemical and pharmaceutical sales. Exports of measuring instruments and automotive products also declined slightly. The export slowdown was mainly due to a sharp decline in demand from China, which fell by over 30%.

The yield on Switzerland’s 10-year government bonds rose above 0.50%, aligning with rising yields of other European bonds in the same category, as investors assessed the potential impact of increased defense spending and new bond issuances. Meanwhile, investors expect the US Federal Reserve to keep interest rates high for an extended period, as recent US economic data showed the resilience of businesses. On the Swiss economic front, the weakening Consumer Price Index (CPI) in January has led to speculation that the SNB may adopt a more accommodative monetary policy in March. Additionally, there are signals of a possible rate cut, which could push interest rates into negative territory if necessary.

Techical analysis data (5H)

Resistance: 0.9005, 0.9018, 0.9037

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 0.8954 - 0.8973 but cannot break the support at 0.8973, you may set a TP at approximately 0.9018 and SL at around 0.8941 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 0.9005 - 0.9018, you may set a TP at approximately 0.9037 and SL at around 0.8954 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 0.9005 - 0.9018 but cannot break the resistance at 0.9005, you may set a TP at approximately 0.8954 and SL at around 0.9037 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 0.8954 - 0.8973, you may set a TP at approximately 0.8941 and SL at around 0.9018 or according to your acceptable risk.

Pivot point February 24, 2025 09:55 PM. GMT+7