Swiss Q4 GDP and KOF Barometer

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With the host of economic data coming out on the last day of the month, we shouldn’t overlook the potential for volatility in CHF pairs.

The volatility could potentially ensue due to the release of last quarters’ GDP data. And from the projections, we could be looking at a bit of a surprise.

Here’s what you might want to keep in mind when considering how to trade around this important data release.

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Schedule and Expectations

The big event for the Swissie is the GDP data coming out at 07:45 CET (or 1:45 EST). That is followed at 09:00 CET (03:00 EST) by the release of the KOF Economic Barometer.

Expectations for the GDP number are mixed. There is more clarity on the year over year comparison, with the expectation of 1.8% growth. This would be less than the annualized figure for the second quarter, which came in at 2.4%.

There is more controversy over the quarterly GDP growth, with some analysts pointing to quarterly growth of 0.4%. On the other hand, there is a group of economists that are predicting the Swiss economy shrank a further 0.7% in the last quarter.

That is significant because the third quarter came in with a surprise negative growth of 0.2%. If the fourth quarter were to register negative (even if wasn’t as much as 0.7%), it would mean had Switzerland slipped into technical recession. Arguably, that would lead to a bit of consternation in the markets, and a corresponding move in the CHF.

As for the KOF Leading indicator, expectations are for it to trickle up to 95.4 from the prior month’s 95.0.

The Trends

Switzerland has been somewhat standing out in Europe for its good economic performance in comparison to its neighbors. This is why a negative outlook for their GDP would be quite a surprise.

Part of that might be explained by the importance of the financial industry in the Swiss economy. The fourth quarter saw a significant drop in global equities which naturally impacted the results of major Swiss financial institutions.

However, to compensate for that, Swiss trade during the quarter was doing exceptionally well. A strong trade balance helped bring cash into the country, as did employment. Retail sales showed a bit of weakness, but in general, remained relatively flat.

On the more optimistic front, even if the fourth quarter underperformed, the third was only barely negative at 0.2%. And, that might be corrected up enough to avoid a technical recession.

The Markets

GDP data is one of the pre-eminent indicators for traders, of course. However, it is also quite delayed. This release is nearly two months old. The markets have moved on from the relative panic that the end of the 2018 correction was causing among the media in general.

A below-average result in the GDP figure would be well within expectations. And it wouldn’t be surprising that the market has already priced it in, given that we have all the other indicators from that period.

What would give the markets a bit of a nasty shock would be if Switzerland slipped into technical recession. Incidentally, this something Germany recently just barely managed to avoid.

It would be the only economy on the continent in that condition, but an economy that is highly open to the broader trends in the rest of Europe. If any scenario was going to provide a significant amount of volatility in the Swissy, that would likely be it.

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